LOS ANGELES (CN) - Top bosses of the International Union of Operating Engineers Local 501 embezzled "tens of millions of dollars" and ran the union "with the same disregard for others' rights as the mob," 10 members say in a federal RICO class action.
Lead plaintiff Finn Pette and other members of Local 501 sued the International Union of Operating Engineers and 27 of its officers, including president James Callahan, former president Vince Giblin, and 13 vice presidents. Able Engineering Services and ABM Engineering Services are also named as defendants.
"This action arises from years of illegal activity by the International Union of Operating Engineers and its controlling officers and co-conspirators," the complaint states. "Local 501, a local trade union, and its members, were victimized by those many years of illegal activity. The unlawful abuses suffered by Local 501 and its members takes three predominant forms. First, millions upon millions of dollars were withheld and/or embezzled from Local 501 and its membership. Second, Local 501 was prevented from expanding its membership; the employers violating their contracts with Local 501 were protected by defendants, who were receiving kickbacks for their protection. And third, the membership of Local 501 was denied the right to freely select its own officers, through fair and honest elections.
"The conduct of defendants harkens back to the days of unrepentant racketeering by organized crime, which makes some sense here. The International Union of Operating Engineers conducts its affairs with the same disregard for others' rights as the mob. Not surprisingly, the International Union of Operating Engineers has a long history of ties to organized crime families in New York and New Jersey, and they have apparently learned their techniques from the very best of those crime syndicates."
The 400,000-member union represents "heavy equipment operators, mechanics, and surveyors in the construction industry, and stationary engineers, who work in operations and maintenance in building and industrial complexes, and in the service industries. IUOE also represents nurses and other health industry workers, a significant number of public employees engaged in a wide variety of occupations, as well as a number of job classifications in the petrochemical industry," according to the complaint.
The union, founded in 1896, has 123 locals throughout the United States and Canada and is the 10th largest union in the AFL-CIO, members say.
Many of the plaintiffs were union officers, including James McLaughlin, who was the Local 501's business manager and a vice president for more than years, until he was "forced to resign in 2009," according to the complaint.
The plaintiffs claim former General President Vince Giblin, a defendant, told officers in Local 501 that "if they wanted to serve as an officer, they had no choice but to contribute to the President's Club, in amounts ranging from hundreds to thousands of dollars."
They claim that defendant Dennis Lundy, director of the Local 501 Apprenticeship Trust Account, embezzled money. The plaintiffs say Lundy forged McLaughlin's signature on checks and charged "many thousands of dollars in lunches to the fund, though the lunches were not for any Fund business purposes. Instead, Mr. Lundy was having an affair with [defendant] Cynthia Escanuelas, an employee of Local 501."
After Giblin promoted Lundy to Western Regional Director, McLaughlin reviewed the fund's financial statements and discovered "a number of improper, personal charges related to food, beverage, and travel purchases," the complaint states.
McLaughlin says he recruited Finn Pette, Local 501's former financial secretary, and plaintiff Daniel Himmelberg, a former assistant business manager, to investigate the alleged embezzlement. He also hired an outside accounting firm for an audit, McLaughlin says.
"An outside auditor concluded that of $56,670.51 charged to the Apprenticeship Trust Fund by Lundy from January 2007 to July 2007, $13,087.19 constituted meals and entertainment, $13,223.70 constituted travel and lodging, and $16,810.45 constituted books and equipment. Many of Lundy's charges were for nothing more than expensive lunches with his mistress," the complaint states.
The plaintiffs say the auditor found that Lundy made other extravagant charges to the company credit cards during 2006.
"During that time, of $84,352 charged, $20,635.05 constituted meals and entertainment, $24,397.52 constituted travel and lodging, and $30,380.11 constituted books and equipment," the complaint states.
The auditor found another $28,981.54 in unsupported charges, according to the complaint.
"It is believed that some of the unsupported charges were false submissions used to embezzle funds for a cosmetic breast augmentation procedure Lundy obtained for Cynthia Escanuelas," the complaint states.
When Giblin learned about the audits, the plaintiffs say, he threatened McLaughlin and ordered him to stop the investigation.
When McLaughlin refused, Giblin threatened his life, and the lives of Pette and Himmelberg, according to the complaint.
The threats came during a March 10, 2010 phone call to plaintiff Robert Fox, previous business manager for Local 501 and a friend of Giblin's father, the complaint states: "When Mr. Fox advised Mr. Giblin that he did not want Giblin to take action against Jim McLaughlin, Dan Himmelberg and Finn Pette, the conversation became even more confrontational and Mr. Giblin stated that he would kill or have these three union officers killed."
The complaint continues: "Mr. Fox believed the threats from Mr. Giblin to be genuine. Mr. Fox believed that Vince Giblin had the ability to order the deaths of Mr. McLaughlin, Mr. Himmelberg, and Mr. Pette because of Mr. Giblin's connection to organized crime in New Jersey, Vince Giblin's home territory.
"In direct response to the death threat made by Giblin against three of the union officers of Local 501, Mr. Fox contacted these three individuals and strongly suggested they purchase guns to protect themselves. Mr. Fox refused to discuss anything over the phone because he knew Giblin had a penchant for wiretapping and eavesdropping on calls and Mr. Fox feared his own phone was tapped by Giblin. Moreover, he refused to meet the subjects of the death threats at his home for his safety, his wife's safety, and the safety of the union officers.
"In fact, for the past several years, IUOE has exercised total control over Local 501, all for the purpose of preventing any discovery or disruption of the many kickback schemes in place that divert tens of millions of dollars from Local 501 and its members to leaders of the IUOE, including past IUOE General President Vince Giblin, the current General President, Callahan, high ranking IUOE employees of headquarters and the past and current vice presidents that do the bidding of the IUOE General President."
The plaintiffs say Giblin forced McLaughlin to resign as a senior vice president in June 2009, by threatening to fire Pette and Himmelberg and to place Local 501 under trusteeship.
In a previous call from Giblin, on June 9, 2009, Giblin told Fox: "'I told that fat fuck [James McLaughlin] to make that Lundy thing disappear and he never did. That lazy fat fuck has got to go!' Mr. Fox was a trusted confidant of Mr. McLaughlin and knew about the Lundy reference, having already heard from Mr. McLaughlin that Mr. Lundy had embezzled funds from the Apprenticeship Trust at Local 501," according to the complaint. (Brackets in complaint.)
Giblin ordered McLaughlin's replacement, defendant Chris Brown, to fire Pette and Himmelberg later that year, according to the complaint.
The plaintiffs claim that the defendants rigged union elections by, among other things, forcing a slate of Local 501 candidates trying to "restore control of Local 501 to Local 501 members" to register as individuals instead of a slate; banning Pette and Himmelberg from running for office by bringing false charges against them; and changing signature collection rules several times "in an effort to prevent resistance members from qualifying for the ballot."
The plaintiffs claim that defendants ABM and Able "conspired with the IUOE to divert or withhold millions of dollars from numerous member benefit funds."
Able Engineering Services is a San Francisco-based janitorial and maintenance services provider. ABM Engineering Services has offices throughout the country and overseas, and offers services such as electricity, landscaping and security, according to company websites.
Able controls about 25 percent of "all stationary engineering positions in the state of California," and ABM controls about 70 percent of them, according to the complaint. 93-94
During the audit of the Apprenticeship Fund, the plaintiffs say, Pette discovered that ABM and Able had shorted the Apprenticeship Fund $180,000 and $280,000, respectively. Pette says he also discovered that the companies had underfunded the Health & Welfare Fund "by millions of dollars over the class period" by failing to report employee work hours.
"The underreporting of hours resulted in a staggering cascade of other harm to Local 501 and its members. First, the underreporting of hours deprived Local 501 of much-needed administrative operating contributions that would have been much higher had the correct number of hours been reported. This harmed Local 501's ability to operate. Second, Able and ABM were underfunding their contributions to the General Pension Fund, which contributions also depend on the number of hours worked," the complaint states.
The plaintiffs say the defendants conspired to engage in racketeering against Local 501, threatened people to hide their "kickback schemes" and control elections, took kickbacks from Able and ABM, and embezzled money from local.
"The fraudulent, unlawful and improper activities of the defendants threatens to continue. Based upon the past pattern of activity, other local unions either have or will likely be defrauded by the defendants. Based upon the past pattern of activity, the defendants will likely continue to defraud Local Unions like Local 501. Furthermore, the defendants are able, based upon their managerial and controlling positions, to replace management in local unions, which should thereafter be defrauded and looted without consequence in a similar manner to the schemes and artifices outlined herein," the complaint states.
The plaintiffs seek compensatory, treble, and exemplary damages of at least $7.5 million for RICO violations, violations of the Labor Management Disclosure Act, and aiding and abetting. They seek disgorgement of the allegedly embezzled money, and appointment of a receiver to "operate defendant IUOE in a lawful manner, to assure the cessation of its illegal acts and to assure the proper handling of income and payments."
They are represented by Ira Spiro with Spiro Moore.
Here are the defendants: International Union of Operating Engineers, James Callahan, Brian Hickey, William Waggoner, Patrick Sink, Jerry Kalmar, Russell Burns, Rodger Kaminska, James Sweeney, Robert Heenan, Daniel McGraw, Daren Konopaski, Michael Gallagher, Greg Lalevee, Terrance McGowan, Louis Rasetta, Vince Giblin, James Van Dyke, Richard Griffin, Chris Brown, Lewis Levy, Randy Henningfield, Paul Bensi, Sandra Acosta, Cornell Sneaks, Jim Scranton, Dennis Lundy, Cynthia Escanuelas, Able Engineering Services, and ABM Engineering Services.