My name is Ken Boehm and I serve as Chairman of the National Legal and Policy Center (NLPC). My legal center sponsors the Organized Labor Accountability Project which publishes Union Corruption Update, a fortnightly newsletter summarizing union corruption news and legal cases. Our database of union corruption case information is available on the web at www.nlpc.org and is used by the public, media, elected officials and union members as an authoritative archive of union corruption cases.
Vulnerability of Union Pension Funds to Corruption
Union pension funds are increasingly vulnerable to corruption. All too many American workers whose retirement security depends on union pension funds have recently found out the hard way that these pensions need greater protection from corruption.
The corruption problems plaguing union pension funds also need to be understood in the context of the explosive growth of pension funds generally. Secretary of Labor Elaine Chao recently testified before Congress that participants in defined contribution plans have grown from nearly 12 million in 1975 to over 58 million in 1998, with a commensurate increase in assets from $74 million in 1975 to $2 trillion in 1998. The size and complexity of the pension system along with the complexity of the legal and regulatory system governing that system make it vulnerable to mistakes, mismanagement and corruption.
The scope of the problem can be understood by examining some of the statistics associated with the issue as well as examining some of the recent prominent cases in which workers lost millions of pension dollars due to corruption.
A March 25, 2002 BNA Daily Labor Report article based on an interview with Department of Labor Inspector General Gordon S. Heddell provides a good idea of the scope of the problem affecting union pension funds. As of March 2002, there were 357 pending labor racketeering investigations under way by the Inspector General. Of those, 39% involved organized crime and of the 357 investigations, 44 percent involve pension and welfare plans. The IG cited a number of cases in which pensions lost funds because of violations of fiduciary duties by plan trustees and stated that investigations of this type involve plan assets of more than $1 billion which are at risk.
The Department of Labor Inspector General used his Annual Report to Congress filed in January 2002 to emphasize his concern:
Another area of concern involves private pension plans, which serve as an attractive target to organized crime elements, corrupt pension plan officials, and individuals who influence the investment activity of pension assets. Labor racketeering investigations of pension plan monies jointly administered by labor union representatives and management representatives (Taft-Hartley plans) have elevated the OIG's concern over the security of the assets in this segment of the pension plan universe.