minutes of the Executive Board’s December 3, 2010,” meeting report that a motion was passed to provide a Christmas Gratuity for that year as well. [Tr. 337-338; Ex. 53.] Thus, these payments were made not under a belief that they were called for by the Local Bylaws or an established past practice, but rather by a discrete act of the Executive Board, ‘The charged parties received Christmas Gratuities in the years and in the amounts listed in Table 3: ‘Table 3: Christmas Gratuities ‘Charged ‘Years Christmas ‘Amount of Party Gratuities Received Christmas Gratuities Received Michael W. Barron 2005, 2006, 2007, 2008, 2009, 2010 $4,248.00 Mary Beard. 2005, 2006, 2007, 2008 $2,755.68 Michael Fairchild 2005, 2006, 2007 $1,973.76 Carlos A. Harris 2005, 2006, 2007, 2008, 2009, 2010 $4,248.00, Vein B. Hodges ‘2005, 2006, 2007, 2008, 2009, 2010 $4,248.00 Reuben L. Johnson 2005, 2006, 2007, 2008, 2009, 2010 $4,248.24 Cedri¢ Jones: 2005, 2006, 2007 $1,951.92 Emest Jones I 2005, 2006, 2007, 2008, 2009, 2010 $4,248.00 ‘Venita A. Jones 2005, 2006, 2007, 2008, 2009, 2010 $4,248.00 Ruth Latson 2008, 2009, 2010 $2,296.08 Frederick McClure 2005, 2006, 2007, $1,970.40 Kevin A. Mitchell, Sr. |" 2005, 2006, 2007, 2008, 2009, 2010 $4,248.00 Herman Reyes 2005, 2006, 2007, 2008; 2009, 2010, $4,248.00 ‘Dwayne Savage 2005, 2006, 2007, $1,951.92 ‘Nathaniel Scurlock 2005, 2006, 2007, 2008, 2009, 2010 $4,248.00 Michael J. Seaton 2005, 2006, 2007, 2008, 2009, 2010 $4,248.00 Gus Stevens 2008, 2009, 2010, $2,296.08 Michael E. Taylor 2005, 2006, 2007, 2008, 2009, 2010 $4,248.00 Lonnie C. Walker 2005, 2006, 2007, 2008, 2009, 2010 $4,248.00, ‘Michael A. Wallace 2005, 2006, 2007, 2008, 2009, 2010 $4,248.00 Michael A. Williams 2006, 2007, 2008, 2009, 2010 $3,695.76 ® Sister Beard, Brother Fairchild, Brother Cedric Jones, Mr. McClure and Mr. Savage were not Executive Board Members as of December 3, 2010, [Ex 13], and would not have attended tho Executive Board mectng on tat day. The minutes reflect tat all of the remaining charged panics did atend that meting, except tat Brother Emest Jones was absent from the meeting. (Ex. 53.] 35‘The roll call from the minutes of the previously described Executive Board meetings in which the Christmas Gratuities were passed in 2006, 2007, 2008 and 2010 show that the charged parties were each at one or more of the meetings where the Executive Board voted to give the officers a Christmas Gratuity. There is no record of any of the charged party taking any action with respect to the Christmas Gratuities paid to the Local Union’s officers at any of those meetings. [Exs. 24, 27, 34, 35, 53.) By allowing Christmas Gratuities to be paid to the Local Union’s. officers, and by receiving and accepting Christmas Gratuities, the charged parties violated the International Constitution and Local Bylaws. The Christmas Gratuities were a transparent end run around the compensation levels preseribed by the Local Bylaws, ‘The Local Union's officers were not fee to circumvent the compensation provisions of the Local Bylaws by giving themselves additional supplementary paychecks and labeling them es “Christmas Gratuities” or “Christmas Bonuses.” “The Local Bylaws clearly and unambiguously set the compensation ofthe Local Union's officers and provided for how that compensation was tobe nereased—namely through the application of the same raises which were collectively bargained with the CTA for the Local Union’s members. [Ex. 8, pp. 23-241 There was no provision for increasing compensation by paying bonuses upon the approval of the Executive Board, If the officers had wanted their compensation to be increased by the payment of bonuses, they needed to propose that the members amend the Local Bylaws under the procedure outlined in Intemational Constitution, Section 13.2, Bylaws, (Ex. 4, p48] ‘The charged parties must have known the Local Bylaws were not followed when they received Christmas Gratuities. The Local Bylaws simply made absolutely no provision for bonuses of any Kind to be paid to the Local Union's officers. [See generally Ex. 8.] 36By engaging in the conduct just described, the charged parties failed to “to insure that the funds and property of the L.U. are preserved .. . and expended in accordance with ... the bylaws of the L.U.” as wes required of them as officers by Section 13.15 of the International Constitution, [Ex. 4, p. 50], and by Section 12 of the Local Bylaws, [Ex. 5, p. 10]. They failed to refrain from “misusing properties of the Local Union” and from “giving such to persons not entitled to the same,” as was required of them by Local Bylaws Section 14, [Ex. 5, p. 11.] Lastly, they violated their fiduciary duty to exercise their responsibilities with care and loyalty. They failed to exercise sufficient care to ensure that overpayments were not made to the Top Six Officers and Executive Board Members, and they failed to act with the requisite loyalty when they engaged in self-dealing by receiving and accepting Local Union treasury funds to which they were not entitled. 37(C. FINANCIAL MALPRACTICE 4. OVERVIEW oF FINANCES While the charged parties were in office, the Local Union saw a significant dectine in its income. Although the Local Union’s number of active members was relatively flat at around 6,500 members from 2006 to 2009, the number of active members dropped to 5,500 in 2010 and remained the same in 2011, [Tr. 500; Ex, 63), as a result ofa layoff, [Tr. 745-746]. The effect of this drop in membership wais apparent on the Local Union's finances: the Local Union’s dues receipts —which, as with almost all local unions, were virtually the only source of income for the Local Union, [Tr. 498-499]—decreased from $4,789,303" in 2009 to $4,431,718 in 2010" a reduction of about 7.5%. [See Ex. 33; Tr. 625-626.] ‘When the incomie of the Local Union remained relatively flat from 2006 to 2009, the Local Union increased its spending; and when the income of the Local Union dropped by nearly % Where amounts of money specified in these findings do not include fractions of a dollar, is because the amounts have been rounded to the nearest dolla. 31 'These amounts do not include money raised in grievance arbitration assessments pursuant to International Constitution Section 21.15, Assessments for Grievance Arbitrations. Similarly they do not include grievance arbitration expenditures. Although such assessments may be significant, they are earmarked for arbitration fexpenses. They should not be a part of a local union's operating budget, and local union officers eannot use such finds for anything other than arbitration expenses. However, as will be discussed more filly, the Local Union's officers misallocated the money raised in assessments for purposes other than erbitrtion expenses. 387.5% in 2010, the Local Union increased its spending yet again. Spending went from $4,450,876 in 2006 to $5,510,944 in 2010, [Ex.75]; that is an increase of almost 24% in spending over a period of declining income. In each year for the period of 2006 to 2011, the Local Union engaged in deficit spending—that is to say that its expenditures exceeded its income, In 2006, 2007 and 2008 the annual deficits were between $68,673 and $114,872. Then beginning in 2009 the annual deficits ballooned. In 2009 the deficit was $599,489. In 2010 the deficit was $1,076,180, In 2011 the deficit was $415,956, and was on track to reach $596,591 by the end of the year. [Ex. 75.]° The difference in income and expenditures only tell part of the story. While the Local Union’s expenditures exceeded its income, the Local Union was also racking up large unpaid bills and liabilities. 2, LOCAL UNION SPENDING The mismanagement of the Local Union's spending (and its incuring of unpaid liabilities) included two troublesome types of spending. First, there was spending on items or programs which were non-essential or wholly discretionary. ‘These were expenses which were neither required under the International Constitution or the Local Bylaws; nor related to the central functions of the Local Union as the collective bargaining representative of its members, 1.2011, however; the Local Union spent ata lower rate than it had ia 2010. While that immediately seemed to be evidence of the Local Union's officers appropriately coming to grips with the Local Union's finances, a deeper look reveals that the lower spending was accomplished, in part, by failing to make payments to vendors and incurring liabilities. Most notably, and as will be discussed, prior to the imposition of the trusteeship on September 12, 2011, ‘the Local Union failed to make contributions to its officer and staff pension plan of $721,758 which was due from 2010, and of $310,416 which was due from 2011. Moreover, from November 3, 2010, to September 13, 2011, the ‘Local Union racked up over $350,000 in unpaid legal bills to its principal law firm. [Ex. 29,] Had the Local Union made the pension contributions during 2011, kept current on its legal bills, and continued to spend money atthe same rate ithad spent money from January 1 through September 11, 201, its spending in 2011 would have reached aasix-year high. s 2 For the same reasons as discussed in fn.31, these amounts do not include money related to grievance abitation assessmenis or expenditures And, a just discussed in fr.32, the spending in 2011 was as low as it was only because the Local Union filed to pay its vendors and to make contribution to its officer and staff pension plan, 391s a labor organization established for the mutual aid and protection of transit workers, or as an affiliate of the Intemational Union. Second, there was spending on items and programs which ‘were essential, but which included wasteful or excessive spending. | Sports Progriim ‘spend money on the sports program. (Ex, 56,] Although Sister Beard, Brother Fairchild, Brother Cedric Jones, Mr. McClure and Mr. Savage were no longer officers and would not have attended the meeting, [Ex. 13], the remaining charged parties, with the exception of Brother Reyes who was absent, attended that meeting. [Ex. 56.) Labor Conference and Winter Fest Balls ‘The Local Union's “Winter Fest Balls” and “Labor Conferences” were other non- essential programs during the period from 2006 to 2011 which cost the Local Union substantial amounts of money. [See generally Tr. 589-592.] The activities at these events included speeches and seminars, [Tr. 589.] The annual Labor Conference included also a golf outing. [Ud] Although a portion of these events may have served important functions—such as strengthening fistemal bonds between members and presenting important information to 40‘members through speeches—it is clear that the cost of these events were increased with non- essential costs, Even though the events generated a certain amount of revenue, the overall cost to the membership was significant. [Ex. 71.] From 2006 to 2011 the Local Union spent $615,485 on these events, and had related revenue of $399,224. [/d.] Consequently, the net cost of the events from 2006 to 2011 was $216,261. [Jd.] While the net cost to the Local Union was significantly lower than the gross cost, the $216,261 was still substantial. Retiree Liaison Program ‘The “Retiree Liaison” program was another similarly non-essential program. The Local Union paid retired members to serve as “Retiree Liaisons” who served as “go-betweens” between the executive officers and retired members of the Local Union, {Tr. 562.] From 2006 to 2011, the cost of this Retiree Liaison program was $160,476. [Ex. 67.] Brother Home testified that in his five years of auditing ATU local unions he had never found another local union which had a similar position or which paid retirees to perform such a role. [Tr. 565.] While itis entirely proper for @ local union to have its retiree members involved in its affairs, the goal of retiree involvement does not justify the creation of a program whereby certain retirees are paid thousands of dollars, Even if, as suggested in questions by Brother Savage, there were changes in retiree health care, it is not clear why the Local Union would need to pay retirees to handle an issue which could be handled by the already-paid salaried officers themselves and ‘volunteers. [Tr. 796] Travel ‘The Local Union spent considerable sums of money on travel. [Tr. 579-580; Ex. 70.) Much of this travel included sending a large number of members to events which were discretionary. [Tr. 578-579] For example, in 2011, the Local Union sent 13 members to the 41Black Caucus in Atlanta, 15 members to the Latino Caucus in San Francisco, and ten members to the Women’s Caucus in New Orleans. [Ex. 70.] As observed by Brother Home, local unions do not typically send such large contingents to these types of events. [Tr. 578-579.] Brother Home calculated the costs of travel (other than travel related to lobbying, the sports program and the annual Labor Conference for which he separately accounted), and found that the Local: Union spent over $500,000 in non-lost time travel expenses from 2006 to 2011; and that it was on track to spend $92,364" on such nor-lost time travel expenses in 2011 alone. [Ex. 70.] Because many members would have received lost time payments for booking off of work to attend these events, these large travel expenses were just a portion of the Local Union’s actual travel ‘expenditures. Payroll Not all overspending was on non-essential categories of expenses. The most obvious expense which included both essential spending and unwarranted spending was the Local Union’s payroll. As already discussed above, a certain amount of the payroll involved raises and bonuses which were not permitted by the Local Bylaws. The portion of the payroll which reflects payments made in violation of the Local Bylaws is, a fortiori, inadvisable and ‘unwarranted by the circumstances. But even if the officers had not reveived and accepted improper raises and bonuses, the payroll would still have been significantly mismansged. ‘As described in Brother Home's testimony, the Local Union's payroll included compensation paid to the Top Six Officers, Executive Board Members and office stafi, and 3° As he did for certain other calculations, Brother Home “annualized” expenses forthe year 2011 to calculate whatpayments made to members to reimburse them for wages lost while conducting business for the union (“lost time payments”). [Tr. 536-537; Ex. 64,] With the exception of a dip in 2008, payroll increased steadily from 2006 to 2011. [Ex. 64,] In 2006, the payroll was $1,958,425. [ld] By 201 1, the Local Union was on track to have an annual payroll of $2,511,104. [Jd] That is a 28% increase in annual payroll over six years, ‘There appears to be no doubt that the Local Union’s officers mismanaged the payroll. As discussed previously, the Local Union’s minutes of the meetings of the Executive Board demonstrate that officer pay was periodically discussed at meetings of the Executive Board during the period of 2005 to 2011. See supra pp. 16-19. Each of the charged parties was at a number of those meetings where it was made plain that the payroll was too high and that it needed to be reduced. So there is little doubt that the charged parties were aware of the need to reduce the Local Union’s payroll. Despite the charged parties’ full awareness that the payroll was too large and needed to be reduced, they completely failed to address the issue, The only action taken by the Executive Board to address the problem was the passage of a motion at its November 20, 2009, meeting®> to cap Executive Board Members at 48 hours of lost time per two-week pay period.”® [See Exs. 43, 44,] From 2006 to 2009, Executive Board payroll had been just under half of the Local 5 Notall ofthe charged paris wer officers ofthe Leal Union when the November 20, 2009, motion pase the subsequent events, Sister Beard, Brother Fairchild, Brother Cedric Jones, Mr. McClure and Mr. Savage were not Executive Board Members at the time of the events discussed in this paragraph. [Ex. 13.] Also, the minutes reflect that Brother Emest Jones did not attend the November 20, 2009, meeting. (Ex. 43.] He did, however, attend the December 4, 2009, meeting when the Executive Board voted to affirm its decision at the November 20, 2009, meeting. (Ex. 44.] 28-The minutes from the November 20, 2009, Executive Board meeting reflect that a number of items from the ‘President's teport paséed, including a proposel onthe pay strcture for the Executive Board. (Ex, 43,] Although the minutes do not make clear what the new pay structure enailed, the minutes from the Executive Board meeting held ‘wo weeks later on December 4, 2009, do. Those minutes show that at the December 4, 2009 meeting the previous meeting was discussed, and there was a vote “io move forward with the proposed salary of 48 hours bi-weekly (Ex. 44) 43Union’s total payroll, (Ex. 64], and so capping Executive Board Members’ hours may have seemed like a sensible approach to dealing with the Local Union’s expenses, However, it was immediately clear that the motion was ineffective, Within six months of the motion the Financial Secretary-Treasurer at the June 25, 2010, meeting” of the Executive Board explained that the Local Union needed a line of credit in order to make payroll, and he asked for authorization to take out a $150,000 line of credit, [Ex. 49,] Months later at the October 15, 2010, Executive Board meeting, the Financial Secretary-Treasurer explained that the Executive Board’s payroll was over $900,000 and would exceed $1 million by the end of the year.”* (Ex. 51.) The cap on Executive Board compensable hours at 48 hours a pay period failed to reduce the amount of the payroll. In 2009, the Executive Board payroll was $1,072,617. [Ex. 64] In 2010 it increased to $1,105,622. [Jd] In 2011 it was on track to increase again to $1,164,622. [Jd] That is to say thet as well intentioned as the motion may have been, it demonstrably failed to effectively address the Local Union’s Executive Board payroll problems, let alone the overall financial problems. Despite the failure of the motion to rein in Executive Board payroll—which was made plain by the Financial Secretary-Treasurer at the June 25, 2010 and October 15, 2010, ‘meetings—the officers took no further action to accomplish what clearly needed to be done. ‘The ineffectiveness of this November 20, 2009, motion in curbing Executive Board ‘Member payroll should have been little surprise to any of the charged parties still serving in 5 sister Beard, Brother Fairchild, Brother Cedric Jones, Mr, McClure and Mr, Savage were not Executive Board Members as of June 25, 2010, and would not have attended the meeting on that date. (Ex. 13,] The minutes reflest that all of the remaining charged parties were present except for Brother Reyes who was absent, and that Brother Stevens and Brother Wallace were late [Ex.49,] 53 Sister Beard, Brother Ferchild, Brother Cedric Jones, Mr. MeChure and Mr. Savage were not Executive Board Members as of October 15, 2010, and would not have stended the meeting on that date. (Ex. 13] The minutes reflect tha all of the remaining charged parties wee present [Ex. 51] 44office,” with perhaps the exception of Brother Stevens. Other than Brother Stevens, each of charged parties serving in office from 2009 to 2011 violated the 48 hour cap on various occasions. [Exs. 61A-61U,] In fact, among that group, each of the charged parties, except for Sister Latson and Brother Wallace, did so in the very frst, full pay period following the motion. [Exs. 614-61] ‘The violations of the November 20, 2009, motion were not mere de minimis violations by three or four minutes. For example, the most egregious violator went long stretches of time during which he exceeded the 48 hour cap by significant amounts, For the first, full pay period after the motion passed, this Executive Board Member received and accepted @ payment for 88 hours, [Ex. 61S.] In the following six pay periods he accepted pay for 64 hours, 64 hours, 56 hours, 88 hours, 64 hours and 72 hours. [Jd.] And the records show that this was not a case of a bad start. [Jd] He had a similar run in 2011 when, starting with the pay period from January 9 to 22, 2011, he accepted payment for 72 hours. {/d.] In the following twelve pay periods he accepted payments for 64 hours, 64 hours, 88 hours, 88 hours, 72 hours, 80 hours, 88 hours, 96 hours, 88 hours, 96 hours, 88 hours, and 64 hours of pay for each of the following pay periods. [0d] If the Executive Board Member had not gone over 48 hours in just those pay periods listed above, the Local Union would have paid him for 960 fewer hours, and paid him approximately {$30,000 less than it did. It almost must be pointed out that a portion of the payroll was the result of the improper ‘January 28, 2006, raise and the improper Christmas Gratuities which Executive Board Members » Sister Beard, Brother Fairchild, Brother Cedric Jones, Mr. McClure and Mr. Savage were notin office at any time following the November 2009, motion. (Ex. 13] 45received. The payroll cost of the raise and Christines Gratuities was $684,561 for the period from November 1, 2005, to September 11, 2011. [Tr. 541-543; Ex. 65.] Even though a portion of the payroll was necessary and advisable, the officers of the Local Union knew that they needed to reduce the payroll in order to meet their obligations to ‘manage the organization properly, The November 20, 2009, motion was an acknowledgement of that necessity. But with the possible exception of this ineffective. rotion, which all of the charged parties who were serving in office may or may not have supported, there is no indication that the charged parties took any action to ameliorate the problem despite their knowledge that payroll expenditures needed to be reined in, (Tr. 93-94]. In fact, Brother Home testified that he was unable to see action which was implemented by the charged parties to reduce payroll whether by restricting the officer structure or capping hours. [Tr. 533-535, 910.] The proof is, of course, in the accounting. The Local Union’s payroll costs went from $1,958,425 in 2006, to an annual rate of $2,511,104 as of September 11, 2011, [Ex. 64], a 28% increase in its annual payroll costs over six years. sais acai __ 2011, the program cost $1,046,944. [Tr. 567-569; Ex. 68.] Although a lobbying program is an _program can still be wasteful or excessive. This was apparently not lost on the Local Union’s: i he it 40 : Executive Board: the minutes of its February 4, 2011, meeting of the Executive Board © Sister Beard, Brother Fairchild, Brother Cedric Jones, Mr, McClure and Mr. Savage were not Executive Board Members as February 4,2011, and would not have attended the meeting on that date. (Ex. 13] 46contained e discussion of finances, including a call for an examination of the expenses of the Lezal Expenses Similarly, the Local Union's legal expenses were a necessary expense but still raise questions about the officers’ stewardship of the Local Union's money. From 2006 through 2011 the Local Union made payments of $3,379,344 to twelve separate law firms. [Tr. 594-595; Ex. 72.] In addition to these payments, the Local Union also accumulated outstanding liabilities. From December 31, 2008 to September 13, 2011, the Local Union went from an outstanding balance with its principal law firm of $56,025 to $593,345, [Tr. 595-597; Ex. 72.] Thus, as large as the over $3 million in payments to law firms were, the number underestimates Local Union spending by not including the unpaid legal bills which the Local Union racked up. Brother Home testified that he could find no “concerted effort” to reduce the Local Union’s legal bills. [Tr. 597,] I understand that a-local union necessarily will have legal expenses. Given thé Local Union’s financial situation and the officers’ failure to make cuts in other areas, its failure to try to reduce its substantial legal bills is problematic. As previously discussed, for each year from 2006 to 2011, the Local Union’s expenditures were greater than its income, These year-after-year deficits required the Local Union to resort to a number of inadvisable practices in order maintain the unsustainable spending levels. 474 ister Latson and Brother Stevens were not Executive Board Members as of October 13, 2006, (Ex 13], and ‘would not have attended the Executive Board meeting on that day. The minutes reflect thatthe remaining charged pies were in atendace atthe meeting, (Et 22] Sister Latson and Brother Stevens were not Executive Board Members as of February 1, 2008, or May 8, 2008, (Ex 13], and would not have attended the Executive Board meetings on those days. The minutes reflect that all of the remaining charged partes did attend those mectings, except thet Sister Bear, Brother Fairchild, Brother Emest Jones, and Mr. McClure were absent from the meeting on Febmary 1, 2008, and Mr. Savage was absent from the May 8, 2008, meeting. (Exs.29, 32.) ‘2 Sister Beard, Brother Fairchild, Brother Cedric Jones, Mr. MeClure and Mr, Savage were not Executive Board Members as of April 21, 2009, June 25, 2010, September 10, 2010, October 15, 2010, and July 22, 2011, (Ex 13], and would not have attended the Executive Board meetings on those days. The minutes reflect that all of the remaining charged partis did attend those meetings, excep thet Brother Sevens and Brother Wallace were late to the June 25, 2010, meeting, Brother Reyes was absent from the June 25, 2010, meeting, and Brother Harris and ‘Brother Walker were absent from the uly 2, 2011, meeting. (Exs. 38, 49,50, 51, 58.) 48It is worth noting also that the lines of credit were not only a symptom of the Local Union’s financial problems, but they also contributed to those problems. The lines of credit cost the Local Union $46,458 in interest and fees over the course of 2006 to 2011. [Tr. 613; Ex. 74.] ‘Soonding Down Assets “Although the lines Of eredit assisted in smoothing over the Local Union’s cash flow "problems, such short-term borrowing did not actually produce the money needed to finance the ler to “reserves. When the Local Union emerged from trusteeship on November 1, 2005, it had assets ‘0f $916,655. As of September 11, 2011, the day before it was placed into trasteeship again, its assets were down to only $227,154. [Tr. 629-630; Ex. 76, International Assistance ‘The Local Union further financed its deficit spending with money provided to it by the International Union. From 2006 to 2011, the Intemational Union provided $391,281 in financial assistance to the Local Union. [Tr. 634-635; Ex. 77.] Misallocation of Arbitration Assessments ‘The evidence showed that the Local Union financed its deficit spending also by taking funds raised in arbitration assessments and using them to pay operational costs which ia normally be paid with general treasury funds derived from dues revenue, Although this helped the Local ‘Union make payroll, it prevented the Local Union from covering its arbitration expenses and explains, in pat, the $593,345 in unpaid bills that it owed to its principal law firm at the time of the imposition of the trusteeship. [Tr. 599-611; Ex. 73.) From January 1, 2006, to September 11, 2011, the Local Union assessed its members $ oe [Ex. 73, see Tr. 605-609], for the cost of grievance arbitrations as required by ¥ ¥ 49 -International Consiaion Section 21.15, Assessments for Grievance Arbitations, Brother Home found, however, tat during that same period the Local Union rade expenditures of only $2,974,142 related to grievance arbitration expenses, [Jd] That is to say that money which was assessed for grievance arbitration expenses was not being used for its proper purpose. ‘The record leaves some question as to the precision with which Brother Home could calculate expenditures related to grievance arbitrations. Mr. Savage ‘objected to Banh pon the basis that he questioned the thoroughness of Brother Home’s examination of payments made by the Local Union and whether they were for arbitration expenses. [See Tr. 604-611] F Notwitistanding any impression nclusting the amount of money spent on arbitration costs, I a that the calculations show that the Local Union failed to use funds which were raised in erhition asesomens to pay for ebiation costs, and insted improperly used such finds for operational expenses, even if thee isa question as to whether they overstate or understate the amount by which it happened. Acraing Libis Lastly, ty tL Union was able to maintain its spending by accruing large lisbilities— that is to say by not paying all of is bills. ‘As already discussed, the Local Union accrued @ “Giabilty of $593,345 with its principal law firm, (Tr. 595-597; Ex, 72.) The largest lability whic teed however, was that owed to the Retirement and Dissbility Allowance Plan for oniegyi Employees of Local 241 Amalgamated Transit Union (‘Local Officers’ Pension Plan”), ‘The failure to make contribution tothe plan not only resulted in a ability of over @ milion dollars atthe time ofthe imposition of the trsteship, but it lso exposed the Local Union to a tax penalty of up to $721,758. ‘These are extraordinary amounts for a local unjon whose dus income was on rat tobe just under $4.3 milion in 2011 (see Ex. 75]. 50The Local Offices’ Penson Plan was for only officers and staf i was not 2 plan in Which all of the Locsl Union's members participated. Tt. 646-647.] The Local Union was obligated to make quarterly contributions to the plan. [See generally Tr, 647-648, Exs. 78, 79) In 2010, the Local Union was required to make four quarterly contributions of $140,210 each. ‘ft 651-652, Ex. 78] Those quarterly payments for 2010 were subject to interest penalties if they were not timely submited within 30 days ofthe close ofthe quarter. [T. 648; Ex. 78, see sites. 78) [As of September 11, 2011, however, the Local Union had not made any contributions for 2010. [Tr. 654-655, 657; Exs, 81, 82.) In fact, as of September 11, 2011, the Local Union had x. 82,] As of that date two quarter not made any contributions for 2011 either. [See Tr. 6 payments of $155,208 each were due for 2011. [Ex. 82,] The plsn’s actuaries had informed the Local Union that it need to make a contribution of $721,758 by September 15, 2011, for the delinquent 2010 contributions, (Tr. 655; Ex. 81], and that ifthe Local Union did not make the contribution by that date the Internal Revenue Service could assess the Local Union an excise tux of up to 100% ofthe value ofthe delinquent amount ($721,758), [Tr. 660-661; Ex. 83] Despite the looming excise tax of up to $721,758, when the Local Union was placed in trusteship on September 12, 201, it had not made the required 2010 pension contributions, [Tr. 657-658.] The 2010 contributions were made only after the trusteeship was impdsed and the Intemational Union had taken control of the Local Union's affairs. (Ud; Ex. 82] Similarly, contributions for 2011 (which were due on April 15, 2011, and July 15, 2011), were not paid é ‘until after the trusteeship was imposed. [Tr. 658-659; Ex. 82.] ‘The Local Union’s officers were well aware that they were accruing a major liability by filing to make the required contin, The mines of meetings of the Executive Board Threflect that the Local Officers” Pension Plan and its costs were discussed regularly by officers. “The need to budget for periodic contributions to the plan was discussed as early as at the July 6, (2007, and August 17, 2007 meetings. [Tr. 661-662; Exs. 25, 26 The plan was discussed again at the November, 21, 2008, [Ex. 34], 45 june 5, 2009, [Ex. 39],** and July 10, 2009, [Ex. 40], 7 meetings. [Tr. 662-665.] é ‘The Local Union’s officers were also well aware that they needed to make a significant contribution by September 15, 2011. The minutes forthe October 15, 2010, meeting ofthe Executive Board slate: “[The Financial Seretary-Treasure] ‘mentioned that $140,000.00 should be paid today but will defer payment until 12/15/10 and reminded the Boar [thatthe] Local has a total of $750,000.00 obligation to thet plan that has to be paid by 9/15/11...” [Tr. 622-623; “Ex. 51,] The matter then came up in four different meetings in 2011, ‘At meetings on May 6, 2011, (Ex. 57,” July 22, 2011, [Ex. 58), July 27, 2011, [Ex. 59], and August 12, 2011, [Ex. 60},*" the Local Union’s officers discussed the pension plan. [Tr. 665-670] ‘The minutes from the fist three of those meetings reflect that the officers discussed Nee EEE [x 1], and would not hve attended the Executive Board mesings n those days. “The minutes reflect that all of Te es ining charged parce did attend those meetings exept that Brother Cedric Jones was late to the Jy 6, JooT, musting, and tat Brother Reyes and Brother Seaton were abset from the August 17,2007, meting. (Es 25,26.) Bite aimutes reflect thet Brother Seaton was the only party subject othe fifth charge who missed tbe meeting on Fe aa, 2008. The Gf charge was withdrawn with respect Sister Beard, Brother Fairchild, Brother Cesc ones, Mr. McClure and Mr. Savage. (Ex. 34] sea Mfntesreflet that none ofthe parties subject othe fh charge missed the meeting on June 5, 2009. [x- 394 3 minutes reflect that Brother Hodges end Brother Seaton were the only parties subject othe fifth charge who ‘were absent from the meeting on July 10, 2009. (Ex. 40.] Reinert es reflec that none of the partes subject othe fh charge missed the mecting on October 15, 2010. 51] P21 utes reflec that Brother Emest Jones and Brother Stevens were the oly partes subject othe fith charge ‘who were absent from the mecting on May 6, 2011. [Ex. 57] a er es reflect that Brother Harris and Brother Walker were the only partes subject to the fifth charge who ‘were absent from the meeting on July 2, 2011. (Ex. $8.] se cesSmuteg refloct tat Brochr Emest Jones was the only party subject to ce fifth charge who was absent from tithes the meeting on July 27,2011, and or the meeting on August 12,2011. [Exs. $8,601] 52.the necessity that the Local Union make the contribution of more then $721,000 to the pension by September 15, 2011. [Exs. 57, 58, 59,] Although certain of the charged parties subject to the fifth charge missed certain meetings, the minutes show that they were all put on notice of the developing liability, and that the finances of the Local Union were in jeopardy as a result oftheir failure to make the contributions for year 2010 in the amount of $721,000. 4, RESPONSE BY THE CHARGED PARTIES AND OTHER OFFICERS ‘The charged partes were well avare of the financial problems thatthe Local Union faced “as a result of their spending. As already noted, the minutes ofthe Executive Board meetings ir tenure make is quite clear that ofgoing concem. [Tr. 673; Ex. 84, p. 5] The audit found disbursements which were not necessary “for ion busines. [Ex 4, p- 5-6] The report contained numerous recommendations. [Tr. 673-678; Ex. 84, pp. 68] At the April 18, 2008, meeting of the Executive Board, * an Intemational Vice President and an International Representative discussed the audit report with the Local Union's officers, [Tr. 681-682; Ex. 31, see generally Ex. 84.] ) ‘The International Vice President returned for the Local Union's May 8, 2008, Executive Board meeting” and the finances ofthe Local Union were discussed again. Inthe couse ofthat discussion the Local Union's President reported that the Intemational Union recommended that the Local Union, among other things, reduce Exeeutve Boal payroll; reduce travel, including by allowing only ome member to weil all caucuses; cut off the sports program with the exception of the ongoing softball season; and cut of donations. [Tr. 684; Ex. 32] The President also noted that the International thought the Locel Union should reduce the number of Executive Board Members. [Ex. 32.) [At the June 6, 2008, mecting of the Executive Board™ the Local Union President discussed the finarices of the Local Union and the need to take substantial action to correct them. ‘te 637-639, Ex. 33.] “At the November 21, 2008, meeting* the then Financial Secretary- ‘Treasurer discussed the Local Union's financial problems. [Tr. 639-640; Ex. 34,] At the . 3 sister Latson and Brother Stevens were not Executive Board Members as of April 18, 2008, (Ex 13), and would tot have attended the Exceative Board meeting on that day. The minutes reflect that ell of the remaining charged tis attend th mowing. (Ex. 3] ‘Suter Latson and Brother Stevens were not Executive Board Merbers as of May 8, 2008, (Ex 13], and would not hhave atiended the Execative Board meeting on tht day, The minutes reflect that all of the remaining charged pers did ated th esting, xcept for Mr, Serge who ws ave. [Ex 32) ‘Sine Latson and Brother Stevens were not Executive Board Members as of June 6, 2008, [Ex 13), and would not have atiended the Executive Board meeting on that dey, ‘The minutes reflect tat all ofthe reining charged pares ated th meting, exept ht Brother Baron and Brot Michal wee at, [E39] “Srother Fairchild, Brother Cedric Jones, Mr, McClure and Mr, Savage were not Executive Board Members as of Noonler 21,2008, (Ex 13], and would not have atended the Executive Board mesing on that day. ‘The minutes peat that all of the remaining charged parties did attend those meetings, excopt that Brother Seaton was absent from that meeting. [EX. 34] aaaJanuary 4, 2010, meeting™ the President reported that as a result of the layoff, the Local Union’s income would be reduced by $48,000 a month. [Tr. 640-641; Ex. 46,] At the October 15, 2010, ‘The minuites of the meetings of the Executive Board conclusively show that all of the charged parties had extensive knowledge of the financial problems of the Local Union, and had personal knowledge of the finances sufficient to require them to take action “to insure that the funds and property of the L.U. [were] preserved . . . and expended in accordance with... the bylaws of the L.U." as was required of them as officers by Section 13.15 of the Intemational Constitution. [Ex. 4, p. 50], and by Section 12 of the Local Bylaws, [Ex. 8, p. 10]. They had full 5 Sister Beard, Brother Fairchild, Brother Cedric Jones, Mr. McClure and Mr. Savage were not Executive Board Members as of January 4, 2010, (Ex 13], and would not have atended the Executive Board mecting on that day. ‘The minutes reflect that all of the remaining charged parties did attend the mecting, except Brother Mitchell who was absent. [Ex.46.] # Sister Beard, Brother Fairchild, Brother Cerio Jones, Mr. McClure and Mr. Savage were not Executive Board ‘Members as of October 15, 2010, (Ex 13], and would not have attended the Executive Board meeting on that day. “The minutes reflect that all of the remaining charged partes did attend the meeting, [Ex. 51] 9 Sister Beard, Brother Fairchild, Brother Cedric Jones, Mr. McClure and Mr. Savage were not Executive Board Members as of December 3, 2010, (Ex 13], and would not have atended the Executive Board meeting on that day. ‘The minutes reflect that all ofthe remaining charged parties did attend the mecting, except Brother Mitchell and ‘Brother Seaton who were absent. (Ex. 53.] Sister Beard, Brother Fairchild, Brother Cedrio Jones, Mr. McChire and Mr. Savage were not Exccutive Board Members as of February 4, 2011, [Ex 13), and would not have attended the Executive Board mecting on that day. ‘The minutes reflect that all of the remaining charged partis did attend the meeting, (Ex. 55.]knowledge of the overpayments which they personally received and accepted in the form of inflated regular pay and Christmes Gratuities, They attended the numerous meetings of the Executive Board at which the dire financial straits of the Local Union were discussed. Lastly, to the extent that there were some aspects of the finances which were not disclosed in painstaking detail at meetings of the Executive Board or otherwise to any of the charged partes, there was sufficient information to put each charged party on notice of the financial problems so as to obligate him or her to fully investigate the finances of the Local Union and determine whether action om his or her part was required.‘As discussed above, the issues of pay, payroll and Christmas Gratuities were all discussed extensively by the officers at numerous Executive Board mestings which the charged parties attended throughout their terms in office, The minutes, however, reveal not a single incidence of any ofthe charged partes making 2 ‘motion to rescind the improper raises given to themselves or the Top Six Officers, There is no record of them challenging the propriety of, or voting against, the Christmas Gratuities, nor of them demanding that the minutes reflect the officers’ votes on the matter, They did not even come to the defense of the then President when the President advised against the granting of 2008 Ciristmas Gratuities atthe November 21, 12008, meeting, ‘The only act taken by the officers of the Local Union with regard to payroll was the ineffective November 20, 2008, motion epping hours for Executive Board Members only. Any argument that they ‘were helpless to stop the implementation of the improper raises, or the payment of the Christmas Gratuities, would fail, Individual officers were fully capable of, refusing the raises they received in violation of the Local Bylaws, and the Christmas Gratuities wihich they recived in violation ofthe Local Bylaws. When they received a Christmas Gratuity check; they were in complete contol ofthe disposition of the Local Union's fands, and they allowed those funds to be expended in violation oftheir obligations to safeguard and properly manage the fonds ofthe Local Union. Also, with regard to those who were officers on nd aftr November 20, 2009, they could have complied with the cap of 48 hours per pay period, or refused any payments which violated the Executive Board’s action. Similarly, as shown above, the overall financial, condition of the Local Union was J discussed extensive > parties attended throughout their terms of office. These discussions included a review of specific y by the officers at numerous Executive Board meetings which the charged recommendations ftom the Intemational Union, from the auditors hired by the Intemational ~ “Union to assist the Local Union, and from the Local Union officers themselves. With regard to payroll costs, it was suggested at no less than eight meetings of the Executive Board that Executive Board Members cut or cap their hours. Supra pp. 17-18. At three meetings it was suggested that the number of Executive Board Members be reduced. Supra p. 18. It was suggested that the First Vice President, the Second Vice President and the ABA — Maintenance could be made part-time positions, [Ex. 37, 84, p. 7] It was suggested that Executive Board Members could perform certain union business on volunteered time and without payment. [Tr. 514-515; Ex. 30,] With regard to travel, in 2008 it was recommended that the Local Union send only one member to any caucus meeting. [Tr. $15; Ex. 32.] With regard to the sports program, in 2008 it was recommended thatthe sports program be eliminated except forthe then ongoing softball season. [Tr. 516;Ex. 32] Although all of these recommendations appear to be reasonable responses to the Local Union’s financial crisis, the officers failed to act on them. When the Local Union suffered a layoff at the CTA, the officers failed to take action to reduce expenses. [Tr. 641.] As noted, despite repeated discussions, the charged partigs failed to reduce their hours. When any one of @ umber of recommendations were made on how to better manage the finances of the Local Union, the officers failed to take any effective action. [See e.g, Tr. 533, 535-536, 641, 644, 646, - 674-678] ‘During the period of time that the charged parties served in office, they abdicated their tesponsibility, the Local Union and its members by failing to take appropriate action to ensure tars EGY" V MaRS TAP EGS. logardsl ad apie ne “course ofthe discussions ofthe Local Unions finances and recommendations for action, the ‘minutes do not show a single incidence in which any of the charged parties made a motion to. a‘Scurlock, Brother Seaton, Brother Stevens, Brother Taylor, Brother ane NTE to see that mandated pension contrib For the aforementioned reasons, I find shagcao charged partes are guilty of the “{clomission of financial malpractice by failing to preserve, manage, invest and expend local unfon funds and property in accordance with the International Constitution, policies of the International Union, the Bylaws of Local 241, and generally accepted practices” as alleged in the first charge against them. For the aforementioned reasons, I find that the charged parties are guilty of the “{cJomission of financial malpractice by failing to implement appropriate financial controls, ‘on Jocal union expenses, including, but not limited to, lost time payments to local union. officers and members, attorneys! fes, lobbying expenses, travel expenses, retire program expenses, and ‘Labor ‘Conference! expenses” as alleged ae fourth charge: ‘against them. « eae ee See jpn ean noc” To et eo 39 /For the aforementioned reasons, I find that Brother Barron, Brother Harris, Brother Hodges, Brother Johnson, Brother Ernest Jones, Sister Jones, Sister Latson, Brother Mitchell, Brother Reyes, Brother Scurlock, Brother Seaton, Brother Stevens, Brother Taylor, Brother Walker, Brother Wallace, and Brother Williams are guilty of the <{cjomission of financial malpractice by failing to make contributions to the Retirement and Disability Allowance Plan for Officers and Employees of Local 241” as alleged in the second charge against them. ‘The record evidence did not sufficiently demonstrate that the charged parties were involved in, ot aware of, the misallocation of arbitration assessments. For the aforementioned reason, I find that the charged parties are not guilty of the <{cjomission ‘of financial malpractice by misallcating money raised in arbitration assessments for purposes other than the arbitration of grievances” as alleged in the third charge against them, and that the charge against them should be dismissed. fargo does not charge the chargé parties wit filing o implement sppropriae financial controle on OAS St «whole (including the selares ofthe Top Six Officers, and Christmas Gratis), my fining that (ee charged paris are guilty of the fourth charge against them docs not rely exclusively on theists 19 vesimsnt approprite financial conuols on officer compensation as whole, To th extent tht the flee 19 iBrlonent appropriate financial contols on ofcer compensation as a whole is ouside the scope of (eS acretting them and ot property considered find onthe entre record thatthe charged paris are guilty of he share ages even, without taking info consideration the failure to place appropriate controls on officer compensation asa whole. 60Local Union and come under the same terms for the collection of dues; and that for a period of _ five years from the date of the General Excoutive Board's decision in this case they be ineligible including, but not limited to executive officer, executive board member, delegate, steward, staff, or other appointed positions such as retiree liaison, lobbyist or sports director. I recommend that Brother Barron, Brother Harris, Brother Hodges, Brother Johnson, Brother Emest Jones, Sister Jones, Sister Latson, Brother Mitchell, Brother Reyes, Brother Scurlock, Brother Seaton, Brother Stevens, Brother Taylor, Brother Walker, Brother Wallace, and Brother Williams be found guilty of the second charge against them. I recommend that they each be fined $3,000 and that such fine be considered dues owed to the Local Union and come under the same terms for the collection of dues; and that for a period of five years from the date of the General Executive Board’s decision in this case they be ineligible to run for, or hold, any position with Local 241, or any other local union affiliated with the ATU, including, but not limited to executive officer, executive board member, delegate, steward, staff, or other appointed positions such as retiree liaison, lobbyist or sports director. 61recommend that the charged parties be found guilty ofthe fourth charge against them, 1 recommend that they be fined $3,000 and that such fine be considered dues owed to the Local Union and come under the same terms for the collection of dues; and that for a period of five years from the date of the General Executive Board’s decision in this case they be ineligible to run for, or hold, any position with Local 241, or any other local union affiliated with the ATU, including, but not limited to executive officer, executive board member, delegate, steward, staff, or other appointed positions such as retiree liaison, lobbyist or sports director. 1 recommend that the charged parties be found guilty of the fifth charge against them. 1 recorfimend that each charged party be fined in the amount corresponding to each one of them as, specified in “Table 2: Overpayments as a Result of January 28, 2006, Raise,” under the column titled “Amount on Regular Pay," the amount of overpayments I found that each of the charged parties received as a result of improper raises in the hourly compensation rate for Executive © This amounts specified in the “Amount on Regular Pay,” column does not inchde the amounts in Local Union funds which the charged partes received asa result of the effect ofthe improper raises on Christmas Gratuitis. Tf, however, the General Executive Bosrd finds the compensation paid as regular pay improper but the Christmas Gratuities proper and therefore find the charged parties not guilty of the sixth charge against them, Trecormmend that they be fined also the amount corresponding to each one of them as specified in “Table 2: Overpayments as a Result ‘of January 28, 2006, Raise,” under the column titled “Amourt on Christmas Gratuity. 2Board Members, and that such fine be considered dues owed to the Local Union and come under the same terms for collection of dues; and that for a period of five years fom the date of the General Executive Board’s decision in this case they be ineligible to run for, or hold, any position with Local 241, or any other local union affiliated with the ATU, including, but not timited to executive officer, exeeutive board member, delegate, steward, staff, or other appointed positions such as retiree liaison, lobbyist or sports director. recommend that the charged parties be found guilty of the seventh charge against them. recommend that each charged party be fined the amount corresponding to each of them as specified in the “Table 3: Christmas Gratuities,” the amount of overpayments I found that each of the charged partes received in the form of Christmas Gratuities, and.that such fine be considered dues owed to the Local Union and come under the same terms for collection of dues; and that for a petiod of five years from the date ofthe General Executive Boar's decision inthis case they be ineligible to run fr, of hold, any postion with Local 241, or any other local union affiliated with the ATU, including, but not limited to executive officer, executive board member, delegate, steward, staff, or other appointed positions such as retiree liison, lobbyist or spors director. _Eurther Recommendation on Penalties {am mindful that the charges against the charged parties come, in part, from the same set of facts, and of the requirements of justice and proportionality. For that reason, I recommend 63that any periods of ineligibility to run for or hold @ position with the Local Union run concurrently. I recommend further that any fines imposed as a result of the first, second, third and fourth changes ageinst any of the charged parties run concurrently with any fines imposed as a result of those charges, or the fifth or sixth charges. However, I recommend that any fines imposed as a result ofthe fifth or sixth charges run consecutively with each other. The fifth and sixth charges are unique in that each involve conduct which was not only a violation of the charged parties’ duties and responsibilities, but involved also their personal receipt of Local Union funds to which they were not entitled, Those Local Union funds should be returned in full to the Local Union. If the General Executive Board were to adopt all of my recommendations, the charged parties would be ineligible to nun for, or hold, any position with Local 241, or any other local union affiliated with the ATU, for a period of five years, and fined the following amounts listed in Table 4: Table 4: Penalties Penal $36,495.52, 36,645.83 $8,150.82 $36,859.87, ‘$31,571.74 $32,621.07 $13,886.41 $48,393.79) $32,160.88 $3,131.01 $10,972.55 ‘$30,035.24 $33,981.64 ‘$12,895.04 $35,741.10, $33,991.17‘Table 4: Penalties (Continued) d Party Charged Party $15,837.72 $39,918.15 $46,087.23 $32,284.22. $29,797.74 Respectfully submitted, VW)