Special Report

Full Accountability — Except for Labor

Democrats have a perverse way of rediscovering the usefulness of a budget cut.

By 7.27.07

Although Democrats professed shock at Republican spending abuses during last fall's congressional campaign, frugality remains rare on Capitol Hill. Outlays are mostly going up. Except, curiously, the budget of the small Labor Department bureau that oversees public disclosure and financial integrity requirements for labor unions.

In a perfect world, where unions were fully voluntary, Uncle Sam would leave union oversight to members. But large numbers of people are effectively pushed, and sometimes forced, into unions by federal law. Labor unions, like businesses, should disclose their finances.

Enforcing public transparency is the Office of Labor Management Standards, an asterisk by Washington, D.C. standards: its 2007 budget is $47.7 million. The administration proposed upping that number to $57 million, but the Democratic majority's appropriations bill would reduce outlays by $2 million.

Economy is possible everywhere in government, of course, and maybe the Democrats are simply determined to get good value for taxpayer resources. Maybe, but not likely. The same bill, notes Diana Furchtgott-Roth of the Hudson Institute, "would increase spending for all other oversight offices in the Labor Department -- including those monitoring mines, occupational safety, wages and overtime, and employee pensions." Overall, the Labor Department's budget would run almost a billion dollars more than proposed by the Bush administration. A Republican proposal to simply maintain current OLMS outlays was defeated.

Department oversight of businesses is not the only area where the Democrats want to spend more. Furchtgott-Roth points out that House Democrats would increase SEC outlays by $3 million next year.

In short, it appears that Democrats believe disclosure is good -- except when it applies to an interest group that contributed roughly $104 million directly and much more indirectly to them in the last election cycle. Among the most important beneficiaries of union largesse were House Speaker Nancy Pelosi and the Democratic heads of committees and subcommittees concerned with union issues.

THE GENESIS OF OLMS was hearings during the 1950s on union abuses, followed by passage of the Labor-Management Reporting and Disclosure Act. The LMRDA created a union member's "Bill of Rights," set reporting and disclosure requirements for unions, established standards for union (in contrast to organizing) elections, and protected union assets.

Unions must file annual financial reports, which go online. The OLMS enforces compliance, while assisting unions in meeting the law's requirements. The Office conducts audits and initiates investigations. The law's effectiveness depends heavily upon the resources, competence, and energy at OLMS.

Unfortunately, resources, competence, and energy are needed in prodigious quantities at OLMS. Just as there are criminal corporations (think Enron), there are criminal unions. So the OLMS has been quite busy. Last year the Office handled 2617 cases of delinquent or deficient reports, conducted 133 election investigations, and supervised 33 elections. The OLMS processed 339 criminal cases involving financial integrity, won 118 indictments and 129 convictions, and conducted 741 compliance audits and seven follow-up audits. Since 2007 the Office has won 760 convictions in union corruption cases. Investigations are up 20 percent and convictions are up 26 percent.

Union functionaries forced to operate in the sunlight undoubtedly view the agency's activities as inconvenient at best, but union members benefit enormously. The OLMS does not control or limit labor spending in any way. It simply requires unions to let their members, and the rest of us, know what the unions are doing. People want to know: between May 2006 and May 2007 the OLMS website received nearly 768,000 hits, around 2,100 daily. When polled on the issue, union members back federal public disclosure to help deter wrongdoing by union officials.

The information collected speaks both generally and specifically. Because of the Office, union members can learn how much of their dues goes to officer compensation and political uses, two areas prone to abuse. The individual spending items always prove interesting. For instance, John J. Miller points to the purchase by the Ironworkers Local 40 of a $52,879 Cadillac as a "retirement gift." After viewing the forms, Furchtgott-Roth cited high salaries, costly board meetings at golf resorts, and Learjet as dubious purchases. She notes: "Perhaps there's nothing wrong with spending union dues on golf or on high salaries for union bosses. Perhaps the rank-and-file don't disapprove -- if they know." OLMS's job is to make sure that they know.

EVEN MORE IMPORTANT ARE prosecutions for embezzlement, theft, and other financial abuses. In 2006 a multi-year case involving no-show jobs by three New York City's Elevator Constructors Local 1, Laborers Local 79, and Operating Engineers Local 14, generated another 14 convictions, for a total of 35. Indictments were issued against IBEW Local 212 for the use of fraudulent payroll forms. Additional prison sentences were handed down in multi-million dollar embezzlement and fraud cases involving several top leaders of the Washington Teachers' Union.

The OLMS went after embezzlement at the Longshoremen's Association Local 1740. The Office prosecuted embezzlement by officials of the Los Angeles County Federation of Labor and Service Employees International Union Local 99. Other recent prosecutions include for embezzlement and kickbacks at the National Association of Letter Carriers, embezzlement and fraud by a Teamsters local, embezzlement at a Steelworkers Local, embezzlement and larceny at the New York State Nurses Association, embezzlement at the Washington Teachers' Union, and embezzlement at the Sheet Metal Workers union. Other unions include the United Food and Commercial Workers Local 763-C (Joliet, Ill.), Service Employees Local 150 (Milwaukee, Wisc.), Wisconsin Professional Police Association, AFSCME Local 1522 (Bridgeport, Conn.), Musicians Local 92 (Buffalo, N.Y.), and Hotel and Restaurant Employees Local 5 and Teamsters Local 996 (Hawaii). There are many more.

It's obvious that organized labor is unable or unwilling to police its own. These cases involve behavior that is criminal in any context. If not the OLMS, who is going to protect labor union members from leaders engaged in looting and pillaging?

What arguments are there for cutting back OLMS's efforts? There obviously is abundant union corruption and misbehavior to investigate and punish. There obviously are significant union abuses to publicize. The OLMS has been active and productive in doing so. Actually, these facts are why labor unions are complaining.

The unions claim that the disclosure requirements are too expensive. Obviously, regulatory oversight involves a balance. When the OLMS proposed revising the LM-2 disclosure form in 2005, requiring unions to list any expenditure above $250, criticism from organized labor caused the Bush administration to set the threshold at $5000. The AFL-CIO's John Sweeney claimed that compliance would "cost union members an estimated billion dollars a year," with the average union bill at $1.2 million. The AFL- CIO actually paid out $54,150--a quarter of Sweeney's salary, John J. Miller notes. That hardly seems an unreasonable price for ensuring that the union's millions of members are kept informed about their union's activities, supposedly on their behalf.

Another contention is that other forms of oversight -- of mining, for instance -- are more important. But the OLMS budget has no impact on other oversight activities; spending a few million dollars more on the Office would have no impact on other funding levels. Anyway, if the Democrats really are worried about money, they could kill a few earmarks to generate enough cash for the OLMS.

DOES THE OFFICE REALLY need more funds? Enforcing disclosure rules and prosecuting financial crimes would seem to be among Uncle Sam's most important roles. Yet last year OLMS was able to conduct compliance audits of fewer than 4.6 percent of unions. Given the incentives for union officials to hide their crimes, more rather than fewer audits would seem to be warranted.

No agency of government, even one with as laudable a mission as the OLMS, should be exempt from scrutiny by Congress. But that review should be non-partisan and objective, not adopted at the behest of a well-funded and self-interested political lobby.

If the Democrats don't believe that labor unions should have to disclose their finances to their members and be subject to prosecution for criminally abusing their members, then let them say so honestly. Otherwise, House Democrats should reverse themselves and vote OLMS enough money to protect union members and the rest of us.

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About the Author

Doug Bandow is a senior fellow at the Cato Institute. A former Special Assistant to President Ronald Reagan, he is the author and editor of several books, including The Politics of Plunder: Misgovernment in Washington (Transaction).