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UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF NEW YORK


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UNITED STATES OF AMERICA,

Plaintiff,

v.
90 Civ. 5722 (CSH)
DISTRICT COUNCIL OF NEW YORK CITY
AND VICINITY OF THE UNITED
BROTHERHOOD OF CARPENTERS AND
JOINERS OF AMERICA, et al.,

Defendants.
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GOVERNMENT’S APPLICATION TO REPLACE UNITEL AS


INDEPENDENT INVESTIGATOR

MICHAEL J. GARCIA
United States Attorney for the
Southern District of New York
Attorney for Plaintiff

BENJAMIN H. TORRANCE
KRISTIN L. VASSALLO
Assistant United States Attorneys
86 Chambers Street
New York, New York 10007
Telephone: 212.637.2703, .2822
Fax: 212.637.2702
E-mail: benjamin.torrance@usdoj.gov,
kristin.vassallo@usdoj.gov

– Of Counsel –
Table of Contents

Preliminary Statement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Facts.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

A. History of the Independent Investigator. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

1. The Independent Investigator Position. . . . . . . . . . . . . . . . . . . . . . . . . 1

2. Tenure of Walter Mack. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

3. Termination of Walter Mack and Appointment of Unitel as Independent


Investigator. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

ARGUMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

A. Unitel’s Performance as Independent Investigator.. . . . . . . . . . . . . . . . . . . . . 9

1. Inadequate Investigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

a. Cipriani Banquet Hall.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

b. On Par Contracting and Corrupt Contractors Referred by Mack


. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

c. L&D Installers and Michael Annucci. . . . . . . . . . . . . . . . . . . . 18

2. Unitel’s Relationship with Union Members.. . . . . . . . . . . . . . . . . . . . 19

a. Telephone Hotline and Confidentiality. . . . . . . . . . . . . . . . . . 20

b. Hanson James’s Hotline Complaint. . . . . . . . . . . . . . . . . . . . . 22

B. The Court’s Authority to Replace the Independent Investigator. . . . . . . . . . 24

Conclusion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Preliminary Statement

Plaintiff United States of America respectfully submits this memorandum of law in

support of its application to replace Unitel as the Independent Investigator.

As further detailed below, an effective and vigorous Independent Investigator is

essential to rooting out continuing corruption in the District Council of Carpenters and its

constituent local unions. The first Independent Investigator, Walter Mack, took major strides

toward this goal, finding voluminous evidence of both corruption and the union’s inability or

unwillingness to detect or stop it. Mack’s reports comprehensively assessed not only problems

with job referral rules and major frauds at job sites, but the systemic impediments within the

union itself that prevented it from effectively investigating corruption. Under Unitel, however,

the results have been dramatically different. Far fewer corruption cases have been

investigated and developed, and the investigations that have been conducted have been

superficial and incomplete, even when Unitel itself has represented that the issues are

important and inquiries are underway. Carpenters no longer report wrongdoing to the anti-

corruption hotline with nearly the frequency they did in the past, and generally appear to have

lost trust in the Independent Investigator. And there has been no significant attempt to probe

the union’s own failings, much less propose reforms that might forestall corruption in the

future. For those reasons, the government lacks confidence in Unitel’s ability to carry out the

crucial mission of the Independent Investigator, and respectfully requests that it be replaced.

Facts

A. History of the Independent Investigator

1. The Independent Investigator Position

At its core, the Consent Decree entered by this Court in 1994 seeks to rid the union of

corruption—that is, corruption that allows contractors to run “cash jobs” that deprive
carpenters of their benefits and fair pay, that leads to politically favored carpenters getting

better and more frequent job assignments at the expense of non-favored carpenters, that

stifles the union’s democratic processes, and that is used by and opens the door to the

influence of organized crime. One of the Consent Decree’s primary vehicles for preventing

such corruption is the job referral system—a set of rules implemented to ensure that

journeymen carpenters and shop stewards are impartially assigned jobs from an out-of-work

list (also referred to as the “OWL”) based on the length of time they have been unemployed.

However, abuse of the job referral system has persisted since its inception. In July

2001, eighteen months after the trusteeship imposed by the international union ended, Local

608 member Eugene Clarke filed a complaint with the District Council Executive Committee

alleging that Executive Secretary-Treasurer (“EST”) Michael Forde and others had violated

the job referral system by manipulating skills designations to allow favored shop stewards to

jump ahead of others on the list and obtain preferred jobs.1 See United States v. District

Council, 2002 WL 31873460, at *3–*4 (S.D.N.Y. Dec. 24, 2002). The District Council rejected

Clarke’s complaint, leading Clarke to move for the Court to enforce the Consent Decree in

January 2002.

In view of the serious allegations in Clarke’s motion, the Government entered into

discussions with the District Council to address the continuing ability of shop stewards and

other carpenters to manipulate the OWL eight years after the Consent Decree’s entry, and the

lack of any truly independent investigator responsible for looking into allegations of

1
Manipulation of OWL skills occurs when a carpenter, in collusion with an employer
or business agent, adds certain skills—often obscure or unnecessary, in at least one case
completely fictitious—to his profile on the OWL, ensuring that he will get a particular job
when the employer requests a carpenter from the list. (Mack’s Report Concerning Shop
Steward John Corrigan (“Corrigan Report”) (Ex. A) at 2–7); U.S. v. District Council, 2002 WL
31873460, at *3–*4 (S.D.N.Y Dec. 24, 2002).

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corruption. These discussions culminated in the modifications to the Consent Decree

memorialized in the stipulation and order entered by the Court on December 18, 2002

(“December 2002 Order” (Ex. B)).2 Designed to address the concerns raised by Clarke’s

motion, the December 2002 Order, inter alia, appointed Walter Mack—the only person

proposed by the District Council—as Independent Investigator. (Id. ¶¶ 5–6, 9).

By its terms, the December 2002 Order invested the Independent Investigator with

broad powers to root out and combat wrongdoing and corruption in the District Council. The

Order authorized Independent Investigator Mack to, among other things, “investigate

allegations of wrongdoing concerning the operation of the job referral system and/or corruption

or violations of federal, state, or local law by District Council representatives, including

without limitation officers, employees, delegates, business managers, business agents, and

shop stewards” (id. ¶ 6(a)); operate the anti-corruption hotline (id. ¶ 6(e)); assess the

competency of the District Council’s anti-corruption program (id. ¶ 6(f)); and issue reports to

the Court and parties (id. ¶ 6(i)).

2. Tenure of Walter Mack

From 2003 to 2005, Walter Mack served as the first Independent Investigator. During

that time, the office proved essential in preserving the integrity and efficacy of the job referral

rules and combating corruption in general. Through extensive evidence-gathering, Mack

revealed widespread violations of the job-referral rules among shop stewards, business agents,

and journeymen, and significant instances of job site corruption in which contractors operated

“cash jobs” without detection or intervention by the District Council. A brief review of Mack’s

efforts, and the evidence they uncovered, makes clear his effectiveness.

2
Unless otherwise noted, exhibits referred to in this brief are those attached to the
Declaration of Kristin L. Vassallo, dated September 14, 2007.

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Over the course of his two-year tenure, Mack and his investigative staff interviewed

scores of carpenters, attended the District Council’s weekly anti-corruption meetings,

conducted numerous unannounced job site visits, and took video surveillance of locations in

which carpenters who had been omitted from shop steward reports were paid in cash. He also

deposed dozens of individuals, including carpenters, shop stewards, business agents, and

contractors, marking as exhibits hundreds of District Council records, including shop steward

reports, job referral records, and Benefits Funds records. As a result of these efforts, Mack

issued six comprehensive reports detailing his findings on the following subjects: the District

Council’s anti-corruption program (“Anti-Corruption Report” (Ex. C)); the manipulations of the

job referral system by shop steward John Corrigan (“Corrigan Report” (Ex. A)); the extent to

which the “special request” system undermined the job referral rules (“50/50 Rule and Request

System Report” (Ex. D)); and corruption and fraud by Boom Construction Enterprises (“Boom

Report” (Ex. E)), Tri-Built Construction, Inc. (“Tri-Built Report” (Ex. F)), and Silo Construction

Corporation (“Silo Report” (Ex. G)). To assist his successor, Mack also prepared seven

“transition memorandums,” which addressed the anti-corruption hotline (“Hotline Transition

Memo” (Ex. I)), shop steward issues, trade show practices at the Javits Center, and evidence

of corruption and fraud by A.J. Pegno and Newtown Creek, Port Incorporated, On Par

Contracting and other contractors (“On Par Transition Memo” (Ex. H)) , and at the site of

Cipriani Banquet Hall (“Cipriani Transition Memo” (Ex. Q)).

As set out in these reports, Mack unearthed rampant violations of the Consent Decree’s

job referral rules. The evidence discovered by Mack showed that shop stewards and

carpenters—often acting in concert with business agents and contractors—rigged job referrals

in many ways, for example by manipulating their skills profiles and the timing of their

dispatches to jobs, and by placing their names on the out-of-work list when they were actually

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employed, otherwise known as “riding the list.” (See, e.g., Corrigan Report (Ex. A), and

depositions transcripts cited in Government’s Memorandum In Support of Motion to Extend

Term of Walter Mack (“Mack Mem.”), at 15–17). Mack also determined that the job referral

rules had been severely undermined by the so-called “request system,” whereby the District

Council allows contractors to hand-pick every carpenter at a job site (except for the steward),

effectively nullifying the “50/50” rule that had required half of workers on a job site to be

referred from the out-of-work list. (50/50 Rule and Request System Report (Ex. D)).

Just as disturbingly, Mack’s investigation revealed that the District Council’s efforts

to detect and investigate job referral violations—even obvious ones—were largely ineffectual.

Of particular note, the District Council failed to catch the “40-hour OSHA” skill listed by

carpenter John Corrigan, and in fact cited it to justify Corrigan’s improper dispatches to

desirable jobs—a startling omission given that the 40-hour OSHA certification is entirely

fictional and the deception therefore could have been readily exposed. (Corrigan Report

(Ex. A) at 2–7). Similarly, despite rampant and easily ascertainable evidence that carpenters

were “riding the list,” Mack found that the union never questioned them about, let alone

disciplined them for, such conduct. (See, e.g., deposition transcripts cited in Mack Mem. at 18–

19).

Mack’s findings went well beyond job referral violations. Mack also uncovered

overwhelming evidence demonstrating the extent to which certain contractors (such as Boom

and Tri-Built) were able to routinely operate large “cash” jobs on major construction sites—

where carpenters are paid off the books, without union benefits, in violation of collective

bargaining agreements—without detection by the District Council. The depositions taken by

Mack revealed that these contractors were able to run large cash jobs through the complicity

of both shop stewards—who falsified their reports to understate the number of carpenters on

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the job site—and business agents—who failed to uncover the false statements despite glaring

inconsistencies between the number of reported carpenters and the scale of the job. (Boom

Report (Ex. E); Tri-Built Report (Ex. F); deposition transcripts cited in Mack Mem. at 20–22).

These revelations showed not only that the union was plagued by corruption, but also that

District Council officers and representatives had done an inadequate job of weeding it out.

Mack used simple but effective methods to pursue his cases. As he explained in his

report on On Par Contracting, in response to hotline complaints of cash payments on the job,

missing shop stewards, and unreported overtime, he and his investigators “looked for and then

followed the money.” (On Par Transition Memo (Ex. H) at 2). For example, in the On Par

investigation, Mack built a record of cashed checks issued by contractors outside their payroll

systems, then began taking sworn depositions of journeyman carpenters and shop stewards,

finding further evidence of off-the-books payments, fraud against the union, corrupt stewards,

OWL manipulation, ineffective-at-best business agents—in short, a wide array of well-known

labor racketeering techniques that had persisted at On Par jobs for years. (Id. at 2–16). This

straightforward template was also employed to investigate Boom Construction and Tri-Built

Construction—again, after the District Council proved itself incapable of effectively

investigating repeated allegations against those corrupt companies. (Boom Report (Ex. E) at

2–17; On Par Transition Memo (Ex. H) at 4 (describing ineffectiveness of union’s

investigation); id. at 27–38 (describing “striking” failure of business agents to detect obvious

malfeasance, and how District Council “ignored or forgot[ ]” evidence of corruption and

“squandered” opportunities to uncover it); Tri-Built Report (Ex. F)).

By the end of his tenure, there was no doubt of Mack’s effectiveness. Under his

stewardship, the anti-corruption hotline received 3165 calls, an enormous increase over the

estimated forty-six logged calls during the two years that Barry Security operated the hotline,

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and strong evidence that carpenters trusted Mack to protect their confidentiality and follow

up on their complaints. (Hotline Transition Memo (Ex. I)). The willingness of carpenters to

come forward and report corruption to Mack was all the more impressive given the fears of

retaliation many described. (Anti-Corruption Report (Ex. C) at 6). In short, carpenters

trusted Mack, and venal contractors and union officials feared being caught by him.

(Declaration of Eugene Clarke (“Clarke Decl.”) (Ex. J) ¶¶ 5–6 (“Carpenters are starting to fear

that accepting cash on the job might be too dangerous because Walter Mack is watching.”);

Declaration of Michael Billelo (Ex. K) ¶ 2 (“Mack has established credibility with the

membership. Carpenters trust and respect him, and fear being caught by him.”); id. ¶ 6 (Mack

forcing business agents to do their jobs); Clarke Decl. ¶ 6 (same)).

In addition, Mack’s efforts have led to several criminal prosecutions. In a case that

arose from Mack’s investigation into Boom Construction, Delroy Haughton, a shop steward

at a Jacobi Hospital construction project, pleaded guilty in September 2006 to receiving more

than $50,000 in bribes from a contractor. (Haughton Indictment and Plea (Ex. L)). Similarly,

three individuals have been charged as a result of Mack’s investigation into Tri-Built

Construction: Patrick McCaul and James McGonnell, the owners of Tri-Built, were indicted

in December 2006 for bribing shop stewards and defrauding the District Council, benefit

funds, and others of at least $6.5 million dollars (McCaul and McGonnell Indictment (Ex. M));

and David Veltri, a shop steward at a Kings County Hospital construction project, has pleaded

guilty to accepting bribes in exchange for falsifying shop steward reports (Veltri Plea (Ex. N)).

Moreover, Mack’s investigation into On Par’s massive cash job scheme led to the indictment

of On Par’s principal, James Murray, who was charged with defrauding the District Council

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benefit funds and others of more than $30 million.3 (Murray Indictment (Ex. O)).

Finally, Mack also used his authority as Independent Investigator to identify systemic

flaws in the union’s anti-corruption efforts. He noted when the District Council was unable

or unwilling to adequately investigate evidence of corruption, or when business agents

inexplicably failed to notice the most obvious signs of malfeasance. (Boom Report (Ex. E) at

3–4, 27–38; Tri-Built Report (Ex. F) at 2–3, 10–11 & n.10 (“shallow, sloppy and ineffectual”

anti-corruption efforts), 15–16 (benefits funds’ “unwillingness . . . to cooperate” with

investigation), 16–19 (ineffective audits), 19–27 & n.16 (District Council’s “inattention to

vigorous follow-up”); Anti-Corruption Report (Ex. C)). He detailed how the union’s

undermining of the job referral rules by expansion of the “request” system permitted

corruption to flourish and “nurture[d] abuse,” and his view that the situation urgently

required review by the Court. (Boom Report (Ex. E) at 40). And he noted, with obvious

dismay, when even after two years of his efforts the union was still unwilling or unable to take

corrective action. (Tri-Built Report (Ex. F) at 27 n.20). Mack’s tenure thus demonstrated his

commitment not merely to finding individual instances of corruption, but to eliminating the

conditions that allowed it to persist.

After this exceedingly productive two-year appointment, the Court “commended” Mack

for “embrac[ing] his role [as Independent Investigator] with zeal and diligence, showing

compassion for the carpenters who he serves and a genuine desire to purge the District

Council of corrupt practices.” United States v. District Council, 2005 WL 1137877, at *8

(S.D.N.Y. May 11, 2005). In fact, the Court paid Mack an even higher compliment, finding

that the evidence he had gathered “makes it clear . . . that continuing problems with respect

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The charges against McCaul and McGonnell are pending. Both Haughton and Veltri
await sentence. Murray fled the country after he was indicted and remains a fugitive.

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to the operation of the job referral rules make the continuing presence and activity of an I.I.

essential to the accomplishment of the objectives identified by the Stipulation and Order

[creating the office of Independent Investigator] and by the Consent Decree which preceded

it.” United States v. District Council, 2005 WL 975857, at *2 (S.D.N.Y. Apr. 26, 2005).

3. Termination of Walter Mack and Appointment of Unitel as Independent


Investigator

The Order appointing Mack specified a two-year term. At the end of that time, the

union sought to terminate Mack as Independent Investigator, while the government argued

for his retention. The Court ruled for the union. United States v. District Council, 2005 WL

975857 (S.D.N.Y. Apr. 26, 2005); United States v. District Council, 2005 WL 1137877 (S.D.N.Y.

May 11, 2005). The parties then were unable to agree on a replacement; again, the Court

ruled for the union, appointing Unitel over the government’s objection. United States v.

District Council, 2005 WL 1713061 (S.D.N.Y. July 19, 2005). The order appointing Unitel,

however, differed from that appointing Mack in an important respect: while at the end of

Mack’s appointment the union was authorized to “issue a . . . notice of termination, or . . .

continue to retain the Independent Investigator’s services” (Dec. 2002 Order (Ex. B)), the later

order appointing Unitel directs the parties to apply to the Court for a determination of

whether the Independent Investigator should be retained, replaced, or abolished (Aug. 22,

2005 Order Appointing Unitel (Ex. P )¶ 5).

ARGUMENT

A. Unitel’s Performance as Independent Investigator

Since the appointment of Unitel, the Independent Investigator has failed to achieve

anything close to the results seen under Mack. Unitel’s tenure has been marked by incomplete

and slow-moving investigations; virtually no new evidence of corruption; and an overall loss

of confidence in the Independent Investigator’s office by not only the government but the union

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membership as well. While Mack, starting from scratch, was able to uncover both numerous

instances of corruption and a variety of systemic failures in the union’s anti-corruption efforts,

Unitel has not even been able to adequately finish the half-completed investigations handed

over by its predecessor and detailed in the transition memorandums, much less propose the

structural reforms necessary to rid the union of corruption going forward. Both on its own

terms and in comparison to the accomplishments of Mack, Unitel’s work as Independent

Investigator has not risen to the necessary level of efficacy needed for this important post. The

Court should therefore appoint a new officer to this position.

1. Inadequate Investigation

The progress on several investigations undertaken by Unitel has been disappointing.

In some cases, the investigations have been started but simply have not advanced—even those

where one of Mack’s transition memorandums set forth significant leads and suggestions for

moving forward. Others have been marked by credulity toward suspect witnesses even in the

face of evidence of corruption, or a dismissive approach to carpenters who report wrongdoing

and their requests for anonymity or confidentiality. With respect to several investigations,

Unitel has told the government that it recognized the importance of the matter and would

aggressively pursue it, but described no further activity in its final report on the subject. And

in one case, Unitel represented to both the Court and the government that an investigation

had been undertaken immediately after receiving a complaint, but had told the complaining

carpenter that it was taking no action at all. The following are merely the most prominent

examples of Unitel’s failings.

a. Cipriani Banquet Hall

In the matter of Cipriani Banquet Hall, a construction project at 200 Fifth Avenue,

Unitel was presented with a case where significant evidence had previously been developed

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of off-the-books workers, fraud against the union, organized-crime involvement, and foot-

dragging by the District Council in investigating known violations of its rules. Yet, although

the new Independent Investigator described this (appropriately) as a “priority matter,” judging

from its final report Unitel did virtually nothing to investigate or pursue the case, and

recommended no action except vague promises of greater scrutiny.

This case was first investigated by Mack, who received an anonymous August 2004

hotline call reporting that no shop steward was on this construction site, even after the

District Council had been told of that violation. (Cipriani Transition Memo (Ex. Q)). Mack

faxed that report to the District Council, indicating it should be given the “highest priority,”

but nearly four weeks elapsed before any union representative visited the job site. (Id.) As

Mack put it, “[n]o satisfactory answers [were] ever provided [by the District Council] to the

questions: why it took so long to do so, when did Local 608 first receive notice of the job site,

and why this job, openly discernible from the street, in a high profile building, and having

received already attention from Local 79 of the Mason Tenders Union, did not get checked out

until I pressed Gary Rothman, Esq. repeatedly and regularly at [Anti-Corruption Committee]

meetings for a response.” (Id.) Mack proceeded to issue subpoenas and conduct witness

interviews. (Id.) Of particular significance, he found that John Mingione and Joseph Delio—a

convicted felon implicated in off-the-books District Council jobs, and another convicted felon

alleged to be an associate of the Genovese crime family, respectively—had been present on the

job site at the instance of a Cipriani representative. (Id.; Moscatiello Indictment excerpts

(Ex. R)). Mack’s investigation, however, was pretermitted by the end of his tenure as

Independent Investigator, and he referred the matter to Unitel for further action, with specific

questions for further investigation. (Cipriani Transition Memo (Ex. Q))

Unitel provided the government with a status memorandum in August 2006, detailing

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its investigation to that date. In December 2005, the new Independent Investigator

interviewed Frank Schiavone, the District Council business agent who first visited the

Cipriani job site after Mack alerted the union of alleged violations there. (Unitel Status

Report on Cipriani Banquet Hall (“Unitel Cipriani Status Report”) (Ex. S)). Schiavone told the

Independent Investigator that Mingione and Delio had in fact been on the job site, and had

“made threatening statements and gestures to him.” (Id.) Another source told Unitel in

March 2006 that carpenters were being paid cash and “riding the list.” (Id.) Based on this,

the memorandum described the case as a “priority matter,” but one for which follow-up had

been delayed due to the investigation of L&D Installers (see infra Point A.1.c).

In the months that followed, the government repeatedly pressed Unitel to follow

through on this case, which Unitel agreed was a “priority matter.” (Letter from Scarvalone

to Callahan, dated April 19, 2007 (“Apr. 2007 Letter”), (Ex. T) at 3). But despite the

significant amount of evidence, the government’s urging, and its own recognition of the

importance of the case, Unitel’s final report reflected no further investigation: there is no

indication in Unitel’s final report that it took depositions, interviewed more witnesses,

compiled additional documents, or took any other steps to develop the evidence of improper

job practices or organized-crime corruption. (Unitel Cipriani Report, dated June 4, 2007

(“Unitel Cipriani Final Report”) (Ex. U)).

Nor, unsurprisingly given the lack of further investigation, does the Independent

Investigator provide convincing answers to the questions raised. According to the report, the

District Council took no action against the contractor at the time Mack alerted the union of

the violations, simply because its director of operations was on vacation. Nowhere is it

explained how the union could have allowed the enforcement of its rules and anti-corruption

efforts to grind to a halt, or a referral from a court-appointed investigator to be ignored for

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weeks, simply because one person was absent from the office. But Unitel’s report accepts this

without question.4 The report makes no attempt whatsoever to answer another question

raised by Mack: how the District Council was unaware of plain and long-running violations

of its collective bargaining agreement at a high-profile job, even as another union was already

taking action. (Cipriani Transition Memo (Ex. Q)).

The presence of two known labor racketeers on the site is dismissed as, essentially, not

the union’s fault because they were not union members. (Unitel Cipriani Final Report (Ex. U)

¶ 18). But be that as it may, the report reflects no sense of the need for further searching

investigation. Unitel’s reaction to a construction job’s being conducted wholly without union

supervision, with no shop steward on site, with known fraudsters and organized crime

associates present, is merely to recommend ensuring that business agents are “aware” of

future Cipriani jobs and subjecting those jobs to more “intense” investigation. (Id.)

Even more disturbing, the reported threats made by Mingione and Delio are entirely

unaddressed. The “threatening statements and gestures” were reported to Unitel by the

union’s own business agent, Frank Schiavone. Yet, inexplicably, the report makes no mention

of this serious allegation, much less any attempt to ascertain details of what happened or

corroboration from other witnesses.

Finally, the report concludes that a unionized contractor paid cash to non-union

workers, a clear violation of the collective bargaining agreement. (Id. ¶ 17.) But again,

instead of recognizing yet another indicator of corruption on the job site and the need for

4
The report credits the District Council’s attorney, Gary Rothman, with finding
Mack’s fax and raising the matter with local union representatives when he saw them at a golf
function. (Unitel Cipriani Final Report (Ex. U) ¶ 10). That contradicts the account given by
Mack (who was the Independent Investigator at the time), who says the union did not respond
until Mack “pressed [Rothman] repeatedly and regularly at [anti-corruption committee]
meetings for a response.” (Cipriani Transition Memo (Ex. Q) ¶ 2).

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further investigation, Unitel contents itself with obtaining $90,000 from the contractor for its

fraud. (Id. ¶ 7.) Though the Independent Investigator casts this as a “full recovery for the

Union,” the report fails to mention (or explain why) the contractor had earlier agreed to pay

more than twice as much: $212,000 according to Unitel’s August memorandum. (Unitel

Cipriani Status Report (Ex. S)). In either event, it appears that the recovery is the amount

of the fraud the contractor was willing to admit when confronted with evidence of about a

month’s worth of collective bargaining agreement violations, rather than the amount

uncovered after a thorough investigation.

Instead of taking further action to uncover corruption on this job site—or determine

how the District Council allowed it to occur—Unitel proposes “investigative plans” for future

Cipriani jobs, “which require union representatives to make a number of job site visitations

scaled by a gradient developed by the [union’s anti-corruption committee] and the

[Independent Investigator].” (Unitel Cipriani Final Report (Ex. U) at 8). In general, this

proposal abdicates the Independent Investigator’s responsibility, putting the responsibility for

anti-corruption investigations back in the hands of the union program that Mack determined

to be nearly worthless. Specifically, the suggested “investigative plans” are the same

“investigative plans” that the union used against On Par (see infra Point A.1.b)—and that

proved to be singularly ineffective in uncovering years’ and millions of dollars’ worth of

corruption. As Mack reported, the “investigative plan” the union implemented in that case—

like the one proposed by Unitel for Cipriani—called for frequent visits by business agents. (On

Par Transition Memo (Ex. H) at 1 & n.1). However, shop stewards on On Par jobs “typically

. . . seemed to know in advance when a business agent was expected,” making it easy for them

to conceal the frauds taking place on their job sites. (Id.) The District Council’s “investigative

plan” thus “had not yielded any significant results,” and Mack concluded that it was

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“ineffectual in its conception, its execution, or both.” (Id. at 1.) Although Unitel reports that

the District Council has enthusiastically embraced a return to “investigative plans” in lieu of

an aggressive Independent Investigator (Unitel Cipriani Final Report (Ex. U) at 8), that is no

reason to believe that the new plans will be any more effective than the old.

In short, Unitel’s report on the Cipriani case entirely disregards damning evidence of

organized-crime involvement and even threats against union officers, unquestioningly accepts

the District Council’s explanations for its failures and the contractor’s self-servingly limited

admission of the scope of its misconduct, and brushes aside the need for further exploration

of the facts of this case in favor of union-conducted “investigative plans” with a proven track

record of failure. The contrast with Mack’s reports is stark: as set forth above, in comparable

situations Mack took numerous depositions, exhaustively compiled records, and

comprehensively tracked finances—eventually amassing enough evidence with which to

confront witnesses and force them to tell the truth about the job-site corruption. Mack began

with a small amount of evidence and, following where it led, ended up uncovering not only the

fact of cash payments and racketeering on job sites, but ways in which corrupt contractors and

corrupt union officials colluded to permit that to happen, including bribes, stolen union

records, and organized-crime involvement. (Tri-Built Report (Ex. F), Boom Report (Ex. E), Silo

Report (Ex. G)). Mack’s methods led to indictments, convictions, and millions of dollars in

potential recovery for the union. Unitel’s more hands-off approach produced only a small cash

settlement and a vague promise of more vigorous enforcement in the future.

b. On Par Contracting and Corrupt Contractors Referred by Mack

On Par Contracting was another employer against which Mack turned up voluminous

and conclusive evidence of fraud and racketeering. Mack received sixty-one hotline complaints

about cash payments at On Par jobs, omissions of workers from shop steward reports,

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unreported overtime, and jobs with no shop steward. (On Par Transition Memo (Ex. H) at 2).

His subsequent investigation found that these acts had been occurring for years, at numerous

job sites. (Id. at 2–19.) On Par used a wide array of techniques to manipulate the job referral

rules to obtain corrupt stewards, and visits by the District Council’s business agents were rare

and easily evaded. (Id.) Mack’s investigation turned up enough evidence of corruption at On

Par to indict the company’s principal, James Murray. (Murray Indictment (Ex. O)). Yet

somehow before Mack began, “the District Council was unable to make any inroads into

exposing On Par’s practices.” (Id. at 2 (emphasis added)).

The government has on several occasions—in both meetings and correspondence—

asked Unitel to investigate the puzzling question of how the union was unable to detect On

Par’s massive and long-running violations of the collective bargaining agreement. (Apr. 2007

letter (Ex. T); Letter from Lane to Callahan, dated December 8, 2006 (Ex. V)). Unitel agreed

to pursue the matter. (Id.) But from its status reports to the Court, Unitel appears not to

have focused on this crucial issue. The Independent Investigator’s latest status update, dated

May 23, 2007, discusses the government’s forfeiture efforts against Murray and Unitel’s

location of one piece of Murray’s property; a civil action by the union’s benefits funds to recover

some of the defrauded contributions; and internal charges brought against certain carpenters.

(Unitel’s May 23, 2007 Status Report (“Unitel May 2007 Report”) (Ex. W)). But there is no

mention of any current activity by the Independent Investigator, or any plans to explore the

complete failure of the union’s anti-corruption program in this matter, either before or during

On Par’s fraud.

More generally, Unitel’s approach to corrupt contractors seems to focus almost

exclusively on collection of money owed to the union’s benefits funds—at the expense of finding

the root cause of job-site corruption or the District Council’s consistently feckless responses.

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For example, the May 23 status report also mentions the union’s (not the Independent

Investigator’s) lawsuits against companies such as Perimeter Interiors, Pitcohn Construction,

Aurash Construction, and Pyramid Associates (Unitel May 2007 Report (Ex. W))—each of

which a contractor that Mack discovered to be paying carpenters off the books. (On Par

Transition Memo (Ex. H) at 19–21). Putting aside the facts that Unitel did not uncover these

frauds, that Unitel appears not to have taken any further action since Mack did so, and that

Unitel is not itself responsible for the litigation referred to in its status report, it seems that

the present Independent Investigator’s focus is not on investigating how these frauds occurred

and ways to prevent them in the future, but on handing off the cases to the benefit funds for

litigation.

That approach is inconsistent with the Court’s admonition that “continuing problems”

in the union “make the continuing presence and activity of an [Independent Investigator]

essential to the accomplishment of the objectives identified by the Stipulation and Order

[appointing Mack] and by the Consent Decree which preceded it.” (May 11, 2005 Order (Ex. X)

(emphasis added)). Neither the Court nor the parties intended the Independent Investigator

to be simply a collection agent who merely refers matters to the benefit funds’ lawyers.

Rather, the Consent Decree seeks to address labor racketeering and organized-crime influence

in the union, and the orders appointing Mack and Unitel both contemplate full and robust

investigations of the union itself as well as its contractors to root out those types of corruption.

(Consent Decree (Ex. Y) at 1–3; Aug. 2005 Order (Ex. P) ¶ 2.a–.b; Dec. 2002 Order (Ex. B)

¶ 6.a–.b). Mack utilized that authority to uncover job-site racketeering and to identify

systemic flaws in the union’s capacity to police itself and its contractors. But Unitel’s

incomplete investigations against On Par, Pyramid, Perimeter, Pitcohn, Aurash, and others

demonstrate that the Independent Investigator has failed to follow this mandate.

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c. L&D Installers and Michael Annucci

The only investigation Unitel itself has conducted that has led to an indictment to date

has been that of Michael Annucci and Frank Proscia, shop stewards at a job run by L&D

Installers. At the outset of that case, however, Unitel had concluded that it had no merit,

based only on the word of one of those same shop stewards. Only by virtue of an overheard

conversation was the investigation reactivated.

In a memorandum to District Council director of operations Maurice Leary dated

November 30, 2005, Unitel president William Callahan reported that he conducted an

unannounced site visit to a job at 11 Madison Avenue, where L&D Installers was the

contractor. (Unitel Memorandum, dated Nov. 30, 2005 (“Unitel Nov. 2005 Memo”) (Ex. Z), at

2). The visit was prompted by an anonymous call to the Independent Investigator hotline

while still run by Mack; in fact, Mack’s transition memorandum regarding hotline calls

reflected no fewer than six complaints about L&D that Mack designated as deserving “prompt

focused attention.” (Hotline Transition Memo (Ex. I), Ex. 2 at 1, 52, 91, 157, 206 (“routine

violators of the CBA”), 247.) The caller had alleged that the shop steward on the job, Michael

Annucci, was “never on the job” and paying workers in cash, below union scale. (Unitel

Nov. 2005 Memo (Ex. Z)).

Callahan appeared on the site on November 30, 2005, at 12:45 p.m., and found Annucci

present. (Id.) Annucci, whom Callahan found “very professional,” provided shop steward

reports and Callahan checked the union membership cards of carpenters on the job. (Id.)

Callahan arrived at his next job site at 1:45 p.m. at 1st Street and Bowery (id.); thus the visit

to the L&D job could not have lasted much more than half an hour. Based on this single trip,

Callahan concluded that the hotline allegations were “unfounded” and closed the case. (Id.)

Later, however, Annucci was overheard at a local union hall bragging and laughing

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about his good fortune at being present when Callahan visited (as Callahan later related to

the government). Unitel reopened the investigation, and in June referred the matter to the

federal Department of Labor, with evidence of regularly occurring fraud against the union over

the course of five years—though the accompanying report did not mention the Independent

Investigator’s previous decision to close the case. (Letter from Callahan to DOL, dated June

16, 2006(Ex. AA); Letter from Callahan to DOL, dated June 13, 2006 (Ex. BB)). That referral

led to the indictment of Annucci and Proscia; the case is scheduled to be tried in November

2007. (Annuci and Proscia Indictment (Ex. CC)).

In sum, Unitel closed the L&D investigation precipitately, after only one short site

visit—despite the fact of multiple reports to the anti-corruption hotline deemed to be of the

highest importance by the predecessor Independent Investigator. Only by a stroke of luck—an

overheard conversation—was the investigation resuscitated and significant job-site corruption

uncovered.

* * *

These investigations demonstrate a pattern of missed opportunities: failures to follow

through on evidence given to Unitel by its predecessor, failures to develop any significant

evidence of corruption on its own, and failures to explore how the union itself has been unable

to detect or stop wrongdoing on its job sites. Instead, Unitel has stated its preference for

handing off the investigatory mantle to the union’s own anti-corruption program, the very

program that has permitted obvious instances of corruption to continue for years on end at an

expense of millions of dollars. Unitel has thus not succeeded in any of its mandates, and

should be replaced with a new Independent Investigator.

2. Unitel’s Relationship with Union Members

An effective operation by an Independent Investigator depends on rank-and-file

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carpenters to report wrongdoing. As Mack has put it, “whatever successes the II team has had

in uncovering wrongdoing and corruption are attributable primarily to the information and

suggestions given us by Carpenters who trusted us to treat their information securely and to

follow it up appropriately.” (Tri-Built Report (Ex. F) at 5 n.5). However, that trust seems to

have dissipated during Unitel’s appointment. The number of calls to the anti-corruption

hotline has dropped sharply, and several members have complained that supposedly

confidential calls to Unitel are followed by harassment or even loss of jobs.

a. Telephone Hotline and Confidentiality

The anti-corruption hotline was an indispensable tool for Mack. In fact, nearly every

one of his reports cites information provided by carpenters, often anonymous, who contacted

him through the hotline. (Anti-Corruption Report (Ex. C) at 2, 6–9; Boom Report (Ex. E) at

2, 5–6, 8–9, 32–33; Tri-Built Report (Ex. F) at 3–5; On Par Transition Memo (Ex. H) at 2, 4,

17; 50/50 Rule and Request System Report (Ex. D) at 9, 17, 19–20). The callers not only

described the malfeasance on the job sites, they even gave Mack’s investigators specific and

successful tips about how to conduct the investigations. (Tri-Built Report (Ex. F) at 4–5).

Under Unitel’s stewardship, however, this invaluable resource and means of connection with

the rank-and-file union members has withered.

In his time as Independent Investigator, Mack received as many as 154 calls a month

to the hotline, never dropping below 68—not including what Mack described as “fully

confidential calls.”5 (Hotline Transition Memo (Ex. I), Ex. 1). In contrast, Unitel’s most recent

status report reflects that, even though the hotline “has been more active in the last few

months,” only 25 calls were received in May 2007 through the 23rd—extrapolating to

5
These numbers also exclude “administrative follow-up requests, caller venting,
Hotline procedure explanations, current events comments, [and] requests for report copies.”
(Hotline Transition Memo (Ex. I) at 1).

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approximately 34 calls that month. (Unitel May 2007 Report (Ex. W)). In other words, in a

busy month Unitel receives about half the number of hotline calls Mack received in his least

busy month—and less than a quarter the number Mack received in a high-volume month.

Moreover, Unitel apparently refuses to accept anonymous calls to the hotline, as

several carpenters have reported (Declaration of Donald Sobocienski (“Sobocienski Decl.”)

(Ex. DD) ¶ 6)—a practice that violates the Court’s order appointing Unitel, which specifically

provides that “[c]alls to the hotline may be received on an anonymous basis” (Aug 2005 Order

(Ex. P) ¶ 2.e, see ¶ 2.e.3). Anonymous calls under Mack’s administration constituted

approximately 30% of the volume, and at times provided information critical to Mack’s most

significant investigations. (Sobocienski Decl. ¶ 4; Anti-Corruption Report (Ex. C) at 6; Tri-

Built Report (Ex. F) at 4–5; Boom Report (Ex. E) at 4; On Par Transition Memo (Ex. H) at 17).

As Mack reported, the reason callers wish to remain anonymous is their fear that their jobs

would be at risk if the union were to learn their names. (Anti-Corruption Report (Ex. C) at

6.) Unitel, however, refuses to accommodate that legitimate concern—thus not only depriving

the Independent Investigator of an important source of information, but evincing a distrust

of the very union members who are ultimately supposed to benefit from anti-corruption efforts.

In fact, union members making complaints have reported that their names have been

disclosed to the District Council without their consent. Hanson James, a carpenter in Local

45, called the toll-free hotline to report that there had been an improper dispatch of a shop

steward to a job at JFK Airport, and that members of the District Council, including business

manager John Early, were aware of it. (Declaration of Hanson James (“James Decl.”)

(Ex. EE) ¶ 2). Although James made clear to Unitel that he wanted to remain anonymous,

and in fact gave only the name “Augustin” during the call, soon thereafter John Early accused

James of “calling the hotline on [him].” (Id. ¶¶ 2–3). Given that James had not told anyone

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that he made the call, and that Callahan apparently recognized James’s voice as that of

“Augustin” in a later phone call, James believes that Unitel is the source of John Early’s

information. (Id. ¶ 4).

Similarly, two carpenters have informed Mack’s chief investigator, Donald Sobocienski,

that Callahan required them to give their names before their hotline complaints would be

investigated, and that following their conversations with Unitel they were confronted by

District Council business agents who had precise knowledge of their allegations and

communications with the Independent Investigator. (Sobocienski Decl. (Ex. DD) ¶ 6). One

of these individuals also told Sobocienski that he had entrusted Unitel with the name of a

“company man” who was willing to confidentially corroborate the allegations of wrongdoing

by his employer after he insisted and was assured that his identity and the identity of the

company man would be kept confidential. (Id. ¶ 7). According to this individual, one day after

his telephone call, the company man was summarily fired. (Id.).

Unitel also disregarded the confidentiality of carpenter Brian Brennan, who contacted

the Court in January 2007 to report problems with the out-of-work list. Directed by the Court

to look into Brennan’s allegations, Unitel forwarded documents identifying Brennan to an

attorney for the District Council without obtaining Brennan’s consent, thus breaching

Brennan’s expectation that his identity would be kept confidential. (Declaration of Brian

Brennan Decl. (Ex. FF) ¶¶ 2–5, Ex. 2 (Callahan letter) (stating that Callahan provided

memorandums to Gary Rothman), Ex. 3 (Rothman letter) (referring to Brennan by name)).

b. Hanson James’s Hotline Complaint

Also indicative of the relationship between Unitel and union members—and Unitel’s

lack of will to undertake investigations—is the initiation of the investigation into allegations

by carpenter Hanson James. This matter also raises questions about whether Unitel has

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accurately represented the status of its investigations to the government and the Court.

Unitel’s investigation concluded that James’s complaints were meritless, and the government

has no views on that determination. However, the process by which that result was obtained

raises significant concerns.

James called the hotline on April 20, 2007, alleging that he had been fired from his

shop-steward position with a contractor known as Skanska because he had run against an

established candidate for an office with Local 45 of the union. (Unitel Hanson James Report

(“Unitel James Report”), (Ex. GG) ¶ 3.1; James Decl. (Ex. EE) ¶ 6). James—who, on his own

initiative, recorded the conversation—contended that he had, with the foreman’s permission,

left the job site early; a Local 45 member reported this to the union, and a business agent then

called the contractor to verify James’s absence then replaced him as shop steward. (Id. ¶ 3.3;

Transcript of April 20, 2007 telephone call between James and Callahan (Ex. II)). James made

similar complaints that day to both the international union and to the Court. Ultimately,

Unitel’s investigation concluded that James had told the Skanska foreman that he had left to

attend union business, but in fact had gone to solicit business for the construction company

he owned, and that he had violated a union rule requiring stewards to notify the local if they

left their job early. (Unitel James Report (Ex. GG) ¶ 3.15, 3.19). In Unitel’s view, James’s

hotline complaints were false and made in order to hide his violations of union rules. (Id.

¶ 4.6).

Not noted in Unitel’s report are the circumstances of how the investigation began.

Initially, according to James’s recording of his hotline call, Unitel refused to investigate at all,

telling James that his case did not present an issue of corruption; therefore, Unitel told James,

“the Independent Investigator doesn’t get involved in these kinds of cases,” “[t]here is nothing

we can do to help you,” and the matter was “between you and the Local and the company.”

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(Transcript (Ex. II) at 2–4). However—after the Court contacted the Independent Investigator

noting that James had made the same allegations to chambers—Unitel represented to the

Court and the government that upon receiving James’s hotline call of Friday, April 20th, “we

began an immediate investigation on that call,” and that by the time the Court contacted the

Independent Investigator the following Monday, April 23rd, “our inquiries were already

underway.” (Unitel Memorandum, dated May 2, 2007 (Ex. HH)). That apparent

inconsistency, coupled with the repeated assurances to the government of investigative

activity that have proved hollow (supra at 12, 16), causes the government to have reservations

that Unitel’s investigations are proceeding as the Independent Investigator has portrayed

them.6

B. The Court’s Authority to Replace the Independent Investigator

As noted above, the Court’s order appointing Unitel differs significantly from that

appointing Mack. The latter order stated that at the end of Mack’s term the union could “issue

a . . . notice of termination, or . . . continue to retain the Independent Investigator’s services.”

(Dec. 2002 Order (Ex. B)). In 2005, the Court ruled that that language was “clear” and

“explicit” in giving the union the authority to terminate Mack without cause. United States

v. District Council, 2005 WL 1137877, at *3–*4. Finding no reason to deviate from that

mandate, the Court refused the government’s request to reappoint Mack.

6
Notably, too, Unitel’s report faults James for refusing to cooperate with the
Independent Investigator’s inquiry. (Unitel James Report (Ex. GG) ¶¶ 4.1, 4.7). While
James’s failures to provide information are not condonable, an obvious explanation given the
facts set forth above—and James’s account that his confidentiality had been violated in a prior
hotline call (James Decl. (Ex. EE) ¶¶ 2–5)—is that James mistrusted Unitel.
In addition, the government questions the wisdom of recommending disciplinary
charges against a hotline caller. Given the evidence that the carpenters who previously
reported wrongdoing to Mack’s hotline do not trust Unitel either to investigate their
complaints or to keep their confidences, referring a caller to the union for discipline can only
further deter information providers from using the hotline. (Cf. Sobocienski Decl. (Ex. DD)
¶ 3).

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However, the order appointing Unitel contains no such language. Instead, at the end

of the Independent Investigator’s term, the parties are required to apply to the Court for a

“further Order (1) continuing the Independent Investigator in office for an additional stated

term; or (2) terminating the services of Unite1 as Independent Investigator and appointing a

successor; or (3) abolishing the office of the Independent Investigator; or (4) such other Order

as the parties may be advised to request.” (Aug. 2005 Order (Ex. P)). The new order,

accordingly, does not give the District Council authority to unilaterally terminate or retain the

Independent Investigator; rather, it gives the union and the government equal rights to be

heard by the Court, which may exercise its discretion in choosing the proper course of action

going forward. Unlike at the end of Mack’s term, no deference is now warranted for the

union’s preference. To the contrary, just as the fox should not choose a guard for the

henhouse, the District Council’s choice of investigator should be met with skepticism.

Conclusion

For the reasons above, the government respectfully requests that Unitel be replaced

as Independent Investigator with a successor to be determined in future proceedings.

Dated: New York, New York Respectfully submitted,


September 14, 2007
MICHAEL J. GARCIA
United States Attorney for the
Southern District of New York
Attorney for Plaintiff

By:
BENJAMIN H. TORRANCE
KRISTIN L. VASSALLO
Assistant United States Attorneys
Telephone: 212.637.2703, .2822
Fax: 212.637.2702
E-mail: benjamin.torrance@usdoj.gov,
kristin.vassallo@usdoj.gov

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