Yesterday, the Department of Labor’s Office of Labor-Management Standards (OLMS) posted on its website a weak final rule which revises standards governing disclosure of certain expenditures of union trusts, including union pension funds, strike funds, and credit unions.

Earlier this year, OLMS sought comments from interested parties concerning the new standards. On April 14, Glenn Taubman, staff attorney at the National Right to Work Legal Defense Foundation and counsel for the National Right to Work Committee, submitted comments regarding the gaping "sensitive information" loophole which allows union bosses to hide the very waste, fraud, and corruption that are all too common in these notoriously mismanaged and underfunded union trusts:

This "sensitive information" exception to full disclosure is simply a loophole allowing union and trust fund officials to unilaterally determine what disclosure must be made public, and then hide a vast array of questionable expenditures. Financial reports of trust fund operations and expenditures can never be considered "confidential" information, because this money is owned by the employees, not the union or trust fund officials. Fiduciary agents have no right to maintain secret records or engage in secret transactions that are purposefully hidden from principals - the employees who are the actual owners of the funds.

But instead of closing the loophole, DOL merely pays lip service to these serious concerns. The fact is -- as long as this loophole exists, corrupt union bosses will be able to withhold disclosure of any expenditures they wish, claiming an exemption. DOL officials "reiterate" or "emphasize" that their sensitive information loophole should be used "sparingly." They say abuse of the loophole will be investigated. But why even have it?  There is no justifiable reason, as Foundation attorneys had explained.

The Department of Labor's serial refusal to promulgate disclosure rules with real teeth is deeply troubling. If President Bush's DOL appointees intend to leave so much discretion to the bureaucrats, these appointees ought to go ahead and quit now -- rather than waiting until January.

The New York Times has a devastating article up on the incestuous relationship between public sector union officials and the New York state legislature. The actual controversy is downright farcical: legislators relied on a public sector union accountant to determine the cost of proposed increases to the state's employee pension plan.

A reasonable observer might suggest that this arrangement represented a clear conflict of interest, but to New York state legislators it was just good book-keeping. According to the Times, the union actuary "reviewed" hundreds of bills for the state before being exposed by the paper's investigation. What's more, the Times reports that the actuary neglected to mention additional legislative costs of up $500 million in his original reports.

The Times' description of the actuary's "methodology" is particularly mind-boggling (emphasis mine):

" . . . in an arrangement that had not been publicly disclosed, Mr. Schwartz [the union actuary] was being paid by labor unions. He acknowledged in an interview that he skewed his work to favor the [union's interests], calling his job “a step above voodoo.”

As a result, legislative leaders said they would no longer rely on Mr. Schwartz’s work, and a disciplinary board affiliated with the American Academy of Actuaries has begun a review of Mr. Schwartz’s conduct.

The Legislature relied almost exclusively on Mr. Schwartz — a consultant to District Council 37, the umbrella group of municipal unions as well as to unions representing firefighters, teachers, detectives and correction officers — to determine the cost of pension bills involving New York City employees."

Fortunately, Empire State legislators swung into action to reasssure the Times that they were monitoring the situation all along. I'm sure New York taxpayers are greatly reassured by their representatives' scrupulous accounting procedures:

"Despite legislative leaders’ assertions that they undertake independent financial analyses of the pension bills, neither the Senate nor the Assembly could provide any records to bolster that claim."

Unfortunately, this sort of lax book-keeping is par for the course when it comes to union pension funds which are often managed for the benefit of union bosses, rather than the pensioners. The incident also highlights the dangerous potential for union political activism in the legislative sphere.

When things get too cozy, there really are no breaks on political corruption. In another instance, Schwartz analyzed a Big Labor supported bill and basically lied to the legislature -- saying it would result in no additional costs to taxpayers.

"Mr. Schwartz conceded in an interview last month that he knew the bill would actually have a significant cost, explaining, “I got a little bit carried away in my formulation.”

He added that he made his projections look “as cheap as possible” to favor his clients."

Yesterday, John told us how employee John McHenry was told that to get out of the Teamsters-controlled pension plan he would have to “quit, be fired or die.”

An article in yesterday’s New York Post demonstrates why McHenry was wise to opt out of the union pension plan. In addition to being massively under-funded (only 3.2% of multi-employer union pension plans have enough assets to pay the promised benefits), it seems that NEA union officials have taken to getting kickbacks for endorsing under-performing, high-fee investment plans to teachers:

Not including management fees, the NEA's only officially endorsed "retirement program" - the Security Benefit Life Insurance Corporation's Valuebuilder annuity - charges 0.9 percent to 2.6 percent a year. Throw in management fees, and the least expensive option costs a teacher 1.73 percent of her account balances each year, while the most expensive costs 4.85 percent.

Over time, a fee that large is devastating. Without inflation, the educator would have to earn nearly 5 percent each year simply not to lose money. Consider a teacher who socks away $500 a month and earns an average yearly return of 10 percent for 35 years: She'd wind up with $1,788,760 upon retirement - quite a sizeable nest egg. But if she were paying 4.85 percent in fees, she'd accumulate less than one-third as much - just $587,854.

It appears that the NEA is willing to endorse a shoddy plan in exchange for a contribution to its coffers. In 2004, the union collected nearly $50 million from the investment vehicles it endorsed.

When a company official told Perfecseal, Inc. employee John McHenry and his coworkers that the only way out of a union-controlled pension fund was to “quit, be fired, or die,” they fought back.

With help from Right to Work attorneys the employees forced Teamsters Local 14-M officials to stop requiring the pension fund contributions, though union officials stopped short of returning the pension fund money that John and others already contributed.

Like many employees, John continues to feel intimidated at his workplace. But when one company official said John’s “name was mud” and claimed that “corporate” was “pissed” at him for standing up for his legal rights, John refused to back down.