Friday, June 3, 2005

INDEPENDENT INVESTIGATOR’S REPORT ON TRI-BUILT CONSTRUCTION, INC

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
RELATED COURT DOCUMENTS


UNITED STATES OF AMERICA,
Plaintiff, 90 Civ. 5722 (CSH)
-against-
DISTRICT COUNCIL OF NEW YORK CITY AND
VICINITY OF THE UNITED BROTHERHOOD OF
CARPENTERS AND JOINERS OF AMERICA, et al.,
Defendants.
__________________________________________
INDEPENDENT INVESTIGATOR’S REPORT ON
UNREPORTED AND OTHER "CASH" PAYMENTS TO CARPENTERS
BY TRI-BUILT CONSTRUCTION, INC
Introduction
The following report to the Court, my fifth report as Independent Investigator ("II") for the District Council of New York City and Vicinity of the United Brotherhood of Carpenters and Joiners ("the District Council"), summarizes the findings to date of my investigation into one contractor’s practice of paying cash, "off the books," to a large number of Carpenters it employed. It is critical to note that the findings discussed in this report are not complete and it is imperative, in my view, that an outside investigator pursue the subjects raised in this report with vigor and without further delay. I am hopeful that my successor can ascertain the full nature and extent of the corruption that permitted Tri-Built Construction, Inc. (“Tri-Built”) to pay many of its Carpenters off the books for years, evading detection despite a cash payment methodology that invited discovery.
Unlike Boom Construction, Inc., which I examined in a report originally submitted on April 15 (the revised version of which was filed on May 2), Tri-Built did not always bribe Carpenter shop stewards in its employ to omit from the shop steward reports the names and/or hours of Carpenters working for the company. Although Tri-Built's owners did bribe at least three shop stewards to keep some Carpenters' names off shop steward reports, they also paid an estimated $150,000 to a person or persons associated with the District Council's Benefit Funds, to arrange for the removal or modification of shop steward reports from District Council files.1 This internal corruption contributed to the long delay in the discovery of Tri-Built's wrongdoing. At the current stage of the investigation, it is impossible to know how many other contractors were able to cheat the District Council and the Benefit Funds with this crude but effective methodology, but I am certain that others exist. The union membership deserves to have this information. I regret that I was not permitted to provide it, and I hope that my successor accepts this responsibility.
Pursuant to Collective Bargaining Agreements ("CBAs"), the District Council's Benefit Funds conduct routine audits of the contractors who hire Carpenters. (Joint Deposition of Tri-Built owners Noel McCaul and Dermot McGonnell ["Joint Deposition"], submitted herewith as Exhibit 2, at 24.)2 Since Tri-Built's owners, Noel McCaul ("McCaul") and Dermot McGonnell ("McGonnell"), were unwilling to rely exclusively upon corrupting all assigned shop stewards, they resorted, as noted above, to bribing an individual (who most likely worked in league with others) to arrange for the removal of shop steward reports.
Because the audit process is supposed to involve, inter alia, a comparison of shop steward reports to benefits remittances, an auditor's examination of the steward reports, or even the discovery that shop steward reports were missing, would have exposed Tri-Built's wrongful conduct years before this investigation began. But since the audit process was compromised by the theft of these documents – and perhaps by other problems with the audit process, itself – Tri-Built avoided financial accountability for unreported, non-union wages and its failure to pay benefits. Because of the potentially wide implications of these compromised audits, I believe that a major goal of my successor should be to ascertain how these flawed audits – perhaps the critical component in this contractor's ability to engage in corrupt practices for at least a decade – could have been conducted and accepted for so many years.
Starting in December 2003, the Hot Line received calls asserting that there were violations of the Collective Bargaining Agreement occurring at the Kings County Hospital (“KCH”) site.3 Following those calls, the II Chief Investigator, Donald Sobocienski, visited the site with District Council Investigator Michael Murphy and a District Council organizer. They familiarized themselves with the job site and had a brief discussion with the shop steward, David Veltri ("Veltri").4 At this point, the II team deferred an investigation of Tri-Built, pending the outcome of investigative follow-up by the District Council.
In April 2004, the Hot Line received another call about Tri-Built, alleging that the company was running cash jobs; one of these calls specified the KCH job site. In May, the Hot Line received two more calls about Tri-Built's KCH job, providing specific information about the number of Carpenters working at KCH and the manner in which they were avoiding detection. Mr. Sobocienski then undertook to work with District Council investigator, Michael Murphy, to plan a "raid" on the job site in an attempt to uncover Carpenters not listed on the shop steward reports.
Just prior to the planned raid, Mr. Sobocienski had a telephone conversation with one of the anonymous Hot Line callers and asked the caller how the investigators might be able to avoid having cash Carpenters hide when they arrived. The caller described the apprentice who obtained the morning coffee orders from the nearby Dunkin' Donuts and suggested that the investigators watch for her, follow her as she re-entered the job site, and see if they could match Carpenters' names to their coffee orders.5
That is what they did. On May 13, 2004, Messrs. Sobocienski, Murphy and a District Council organizer watched for the apprentice and followed her back to the job site, where they attempted to obtain information that they could compare to the shop steward reports in order to check their accuracy. The investigators tried to "card" each of the Carpenters who came to retrieve their coffee and to ask them how long they had been working at the site. Despite the investigators' best efforts, they saw that some Carpenters fled the site. (Additionally, not all of the Carpenters had submitted coffee orders.) A Hot Line caller also told us that several Carpenters waited outside the site while investigators were there.
Thus, while it was not possible to be precise about the number of unreported Carpenters working at the site, Mr. Sobocienski's comparison of earlier shop steward reports with the coffee order list and the list of names taken at the site showed that there were more Carpenters at the site than had been reflected in shop steward reports. This confirmed the information in the Hot Line complaints we had previously referred to the District Council, but without investigative result.
Another Carpenter called Mr. Sobocienski on the afternoon of the raid to complain about the fact that he was being paid off the books, at a non-union wage, without benefits. This caller provided a critical piece of information: that the "cash," or unreported compensation Tri-Built was paying to some Carpenters, was being paid in the form of non-payroll checks. Mr. Sobocienski asked the caller to provide the name of the bank and the number of the account on which the checks were drawn. Although the caller did not comply during that telephone conversation, there were additional telephone conversations and ultimately, the following week, he identified the HSBC account on which his unofficial pay checks had been drawn.
The Court signed a subpoena for the relevant account statements and checks on May 25, 2004. HSBC produced the account statements in June and some of the relevant checks in mid-July. When the extent of Tri-Built’s wrongdoing began to become apparent to me, I contacted Thomas Fitzpatrick, the attorney for Tri-Built and its owners, Noel McCaul and Dermot McGonnell. I reported to Mr. Fitzpatrick that I had substantial evidence, including some documentation from HSBC, that his clients had paid Carpenters unreported, non-union wages in blatant violation of their CBA with the District Council. I also told Mr. Fitzpatrick that I would recommend that his clients be criminally prosecuted unless they agreed to cooperate with the Court by providing accurate and complete testimony concerning their wrongful conduct.6
As we obtained the relevant Tri-Built bank accounts over the next several months, the II team was disturbed to learn that Tri-Built had been paying Carpenters off the books for almost a decade. The failure of the union's audit program ever to discover this wrongdoing despite its relative openness is shocking to this II team. The total breakdown of the union’s audit function with respect to Tri-Built suggests that there may have been and may still be a number of other contractors similarly violating their collective bargaining agreement obligations to the District Council and its Benefit Funds. This is of great concern to the II team and should be to the union membership as well.
II. Information Initially Obtained from McCaul and McGonnell
After my conversation with Mr. Fitzpatrick, and pursuant to another subpoena, Tri-Built produced documents which included its HSBC account statements and copies of the checks written on the account. Along with its HSBC checks, Tri-Built produced documents labeled "Work Schedulers," which contained the names of the Carpenters who had worked for the Company. These are the only documents we obtained which show not just the Carpenters’ names, but also the Tri-Built job site to which each worker was assigned. The Work Schedulers also show who was paid legitimately and who was paid off the books. However, we obtained Work Schedulers only for the period March 31, 2004 through June 29, 2004, because — as McCaul and McGonnell testified — they had destroyed the Work Schedulers and time sheets for periods prior to March 31, 2004 once they became aware of the investigation of the KCH job site. (Deposition of Dermott McGonnell ["McGonnell Deposition"], Exhibit 3, at 14-16.) A sample Work Scheduler is submitted herewith as Exhibit 4.7
Noel McCaul testified on August 19 and admitted that he and his partner had paid some of the Carpenters at KCH off the books and that they had bribed shop steward David Veltri with payments totalling approximately $8,000 to omit some Carpenters' names from the shop steward reports. (Deposition of Noel McCaul ["McCaul Deposition"], Exhibit 5, at 20, 31-32.)8 McCaul also testified to having bribed Pershing Venzen, the shop steward at Tri-Built's Fordham University job site (id. at 55-57), and John Scivoli, the shop steward at Randall's Island, to keep some Carpenters' names off the shop steward reports (id. at 58-61).
McGonnell admitted that he had conspired with John Scivoli ("Scivoli"), the shop steward at Randall's Island, to manipulate the shop steward skills requested so that they matched the skills that Scivoli listed. (McGonnell Deposition, Exhibit 3, at 60-61.) This was confirmed by Scivoli. (Deposition of John Scivoli ["Scivoli Deposition"], submitted herewith as Exhibit 6, at 13-14.) McGonnell did this because he and McCaul had an idea that Scivoli would be likely to agree to keep Carpenters off the shop steward reports. (McGonnell Deposition, Exhibit 3, at 61-62.)9 McGonnell's instincts about shop stewards appear to have been fairly keen:
. . . just by talking to [the] guy for a little while, you can get the feeling that eventually he might work with us. Then there is [sic] other ones you know right off the bat, or at least I feel right off the bat there is no way you are going to get anywhere with them, so I would never approach them in any way, shape or form.
Id. at 88.
McGonnell's partner, McCaul, also had the opportunity to assess Scivoli during a job at Hunter College. Scivoli accepted cash while at the Hunter site and told McCaul that he needed a job that would last longer. (Scivoli Deposition, Exhibit 6, at 10-12.)
III. The District Council's Investigative Efforts
On May 17, 2004, the Monday following the investigative "raid" at KCH, shop steward David Veltri was interviewed by the District Council; Mr. Sobocienski was present for that interview. Veltri denied omitting names from the shop steward reports and gave what the II team believed were incredible excuses for: why the names of certain Carpenters and hours for other Carpenters had been omitted from the shop steward reports; why there were discrepancies between the shop steward reports and daily work sheets Veltri had prepared; and why he had written names on three separate worksheets rather than one.10
The District Council interviewed approximately thirty other Carpenter witnesses. (Typically, either Mr. Sobocienski or another II investigator was present for these interviews.) The majority of these witnesses confirmed that they had been paid off the books for some if not all of their work for Tri-Built. James Foster, a journeyman Carpenter interviewed on June 4, 2004, told the District Council about four workers who had confided in him, after the May 13 raid, that they were paid non-union cash wages (one of the four was not a union member). He also reported that he had given this information to Business Agent Danny Dunbar ("Dunbar") when Dunbar came to the KCH job site on May 14, the day after the investigators' raid. Although Dunbar told me that he remembers talking to Foster and referring him to Director of Operations Maurice Leary (Notes of Danny Dunbar Interview [“Dunbar Interview”] dated April 25, 2005, submitted herewith as Exhibit 8, at 7), no one from the District Council reported this wrongdoing to the II staff. The absence of a writing or record on this subject is unexplained.11
The District Council interviewed two of the cash workers identified by Mr. Foster. One, Keith Joseph, who was interviewed on June 24, 2004, initially told the investigators that he had just started working at KCH and denied that he had been paid cash. After Mr. Sobocienski informed Mr. Joseph that the investigators had the non-payroll checks, and urged him to be truthful, Joseph acknowledged that he had been working at KCH since January and was paid by non-payroll check at a non-union rate. He told the investigators that Business Agent Danny Dunbar saw him on the site many times and simply shook his hand and asked how he was doing.
Another Carpenter, Raphael Rubio, gave the District Council information that turned out to have a significant impact when he told them that he had been paid in cash while working for Tri-Built at Randall's Island. That led the District Council to John Scivoli, the corrupted Randall's Island shop steward discussed above. Scivoli, in turn, provided pivotal information in late September — he told the District Council that McCaul and McGonnell had paid someone to remove shop steward reports from the District Council's offices. Scivoli identified this individual by physical description, which OWL Supervisor Scott Danielson was able to match to a name.
IV. The Removal or Tampering with Shop Steward Reports
During my deposition of McGonnell, I repeatedly questioned how Tri-Built could have been paying cash to so many Carpenters – as McGonnell conceded they did on many Tri-Built jobs – when they could identify only three shop stewards to whom they paid bribes to keep Carpenters' names off shop steward reports. (McGonnell Deposition, Exhibit 3, at 81-88.) Eventually Thomas Fitzpatrick, attorney for McCaul and McGonnell, informed me that Tri-Built had used other means to avoid being caught for paying Carpenters below the union rate, without benefits. This question was also answered by the information that Scivoli provided to the District Council a few weeks after the McGonnell deposition – a former employee of the District Council's Benefit Funds had taken money from the Tri-Built owners in exchange for removing shop steward reports from the union's offices.
On December 2, McCaul and McGonnell gave a joint deposition focused on their payments to the former Benefit Funds employee. McGonnell testified that a Carpenter shop steward named Billy Smith (now deceased) had advised McGonnell and McCaul to contact this individual. (Joint Deposition, Exhibit 2, at 21-22, 27.) McGonnell said that Billy Smith made the suggestion when, back in 1997, he had confided to Smith (who was then working for Tri-Built) that he was concerned about an upcoming audit by the Benefit Funds. (Joint Deposition, Exhibit 2, at 21-22, 24-27.) Smith, in addition to keeping two or three Carpenters off the shop steward reports for three or four weeks in exchange for one or two days' paid vacation (id. at 32, 35), told McGonnell that he had a friend who could help Tri-Built "on some of [their] union projects" (id. at 27, 36, 38).
Smith gave McCaul this individual's name and cell phone number and so began a relationship lasting approximately three years. McCaul and the individual would meet on a street corner, McCaul would give him a list of District Council jobs Tri-Built had done and, at the next meeting, always held on a street corner, the individual would produce photocopies of shop steward reports which McCaul would take back to his office. (Id. at 49, 52, 54-56, 58-61, 68-69, 71-72.) McCaul would compare the shop steward reports with Tri-Built's own records and highlight the names of those Carpenters who had been paid off the books. (Id. at 72, 81, 83-84.) Although the Benefit Funds employee gave McCaul a choice of having the shop steward reports removed or simply altered, McCaul left that decision to this individual – and his associates. (This individual reported to McCaul that he had other people working with him in this scheme. [Id. at 45, 47, 76-77.])
This Benefit Funds employee, for a fee of $10 per hour, per Carpenter, would eliminate shop steward reports or names on them. (Id. at 61-63.)12 The total price for the first round of removals or deletions was between $20,000 and $25,000, which this individual accepted in installments. (Id. at 85-85.) The process was repeated every six months (id. at 94-95) and lasted approximately three years, until this individual stopped responding to McCaul's voicemail messages (id. at 130, 133). At that point, Tri-Built had paid him more than $150,000. (Id. at 96, 98.)
Assuming that this testimony was, as I believe it was, accurate13, the ability of this corrupt contractor to reach within union headquarters and access business records demonstrates that the union's financial controls and audit processes were flawed and unreliable. The seriousness of this lack of controls cannot be overstated.
A. My Inability to Investigate the Removal of the Shop Steward Reports
Unfortunately, I have been stymied in my attempts to explore how and with whose assistance a corrupt employee would be able to remove shop steward reports from the District Council’s offices. I would have required a substantial amount of evidence in order properly to investigate these allegations. The information I required was discussed in the Affirmation of my counsel, Amy Rothstein, submitted on March 14 in support of my application to have the Court sign subpoenas to the Benefit Funds and their investigator, Kroll & Associates, and is described in the attachments to those subpoenas. (Rothstein Affirmation and subpoenas submitted herewith as Exhibit 9.) Among other things, I needed to learn how shop steward reports during the relevant time periods were submitted, maintained, and accounted for. I also needed to know who had access to the reports, how they were transferred to the auditors, and the identities of all employees whose duties would have permitted access to them. My failure to obtain this information was the result of the unwillingness of the Benefit Funds’ legal counsel and investigator to cooperate. As I have said earlier, I urge the new II, with the Court’s permission, either to pursue this investigation or refer it to an outside independent investigator. I continue to believe that this subject is important to the union membership and should not be left solely to the Benefit Funds and their agents.
B. The Questions About the Auditor's Possession and Review of Shop Steward Reports
Corroborating McCaul's and McGonnell's testimony about the filched shop steward reports is the fact that Tri-Built shop steward reports are missing from the offices of the District Council. This fact gives rise to questions that I was unable to pursue: did the auditor fail to consider shop steward reports in conducting the most recent (2002) Tri-Built audit or were they withheld from him; if shop steward reports were not provided to the auditor, why did the auditing firm not bring that to the attention of the Benefits Fund/District Council and why did the union not look into this absence of critical documentation?
These and other questions are particularly compelling given the fact that the 2002 audit included a special anti-corruption audit, requested by the District Council because it suspected wrongdoing at a particular job site. (Deposition of Victor Osario ["Osario Deposition"], submitted herewith as Exhibit 10, at 63-64 and Exhibit VO-4 thereto.) When I finally obtained the auditor's file (after months of delay caused by the Benefit Funds’ failure to cooperate) it contained no shop steward reports.14 Yet Victor Osario ("Osario"), the Abrams, Herde & Merkel auditor assigned to the 2002 audit, testified in a deposition that, as reflected in his audit notes, he had examined shop steward reports (Osario Deposition, Exhibit 10, at 54-56, 63-64; see also Exhibit VO-3 thereto, on page entitled "Audit Worksheet Control Information").
A review by Chief II Investigator, Donald Sobocienski, raises questions about Osario's testimony. Mr. Sobocienski obtained every Tri-Built shop steward report that the District Council had and compared them to Osario's worksheets. In doing so he found that, almost uniformly, names that appeared on the shop steward reports were not included in Mr. Osario's work papers. If Osario had actually compared the documents as part of his audit protocol, Tri-Built’s wrongdoing should have been discovered and remedied by the District Council. (This would have permitted me to spend my time on other important investigative projects.) But Osario clearly did not have or did not use all of the shop steward reports. Without the shop steward reports, Osario's audit had little utility. He certainly could not make any meaningful findings about Tri-Built's compliance with the CBA.
Osario's defective audit is consistent with the evidence, discussed above, concerning the theft of shop steward reports. And, like the other evidence, it raises the question of just how many audits, involving how many contractors, were conducted without shop steward reports despite the critical importance of those documents.
Particularly disturbing is the fact that the audit file did not contain any shop steward reports pertaining to the very job site that had occasioned the District Council to seek an anti-corruption audit. While Osario testified that he had seen and used various shop steward reports in performing his audit, he testified that he had never seen the one shop steward report with which I presented him (Exhibit VO-5 to Osario Deposition, Exhibit 10). He testified that if he had seen that shop steward report, which contained the names of five Carpenters for whom there were no payroll remittances, the result of his audit would have been different. (Id. at 67-71.)
Not surprisingly, Osario's audit finding was that there was only a small discrepancy between union payroll records and the shop steward reports. (Tri-Built's audit balance as a result of Osario’s audit was only about $7,000 as contrasted with much larger audit balances for the two prior audits of Tri-Built.)15 Additionally, although the District Council had requested this "special" audit because the Anti-Corruption Committee suspected that cash was being paid on a particular Tri-Built job, the auditor's file contained no detailed direction from the Anti-Corruption Committee. There was no identification of the shop stewards assigned to Tri-Built, no discussion of the facts or information that caused the District Council to be suspicious of this contractor, and no transmittal records evidencing the delivery of appropriate documentation (such as shop steward reports). (Id. at 76-77.)
In sum, the 2002 Tri-Built audit file raises more questions than it answers. Do the missing documents reflect negligence, tampering or corruption on the part of someone at the District Council? Local 157? The Benefit Funds? The auditing firm? Or do the missing documents – which may never have been given to the auditor or may have been given to but not used by the auditor – reflect nothing more than negligence? And if so, on whose part? What are the implications of this failure for the Anti-Corruption Committee's future performance? These are issues for my successor. If the audit had been performed properly, Tri-Built's almost routine "cash" payroll practices would have been discovered in time to prevent its engagement at the KCH site.
My last report reflected my view that business agents need to be more vigorous in their monitoring of job sites and of the shop stewards for whom they are responsible. (Boom Report at 27-38; see also Request Report at 14-15.) My investigation of Tri-Built, even in its aborted form, has reinforced that view.
Eamon Johnston ("Johnston"), a Tri-Built foreman, testified that the KCH business agents "weren't keeping as tight a rein . . . as they could have." (Deposition of Eamon Johnston ["Johnston Deposition"], submitted herewith as Exhibit 11, at 87-88.) He said that Business Agent Danny Dunbar raised questions on numerous occasions about the 50/50 ratio, but did little to follow up on his questions. (Id. at 88-89.) He also testified that the business agents who visited the site did not check workers' union cards against the shop steward reports. (Id. at 89.) In fact, Johnston testified that in his seven or eight years working for Tri-Built, he had never seen a business agent compare Carpenters' union cards to the shop steward reports. (Id. at 21, 34-35.) As I have noted in previous reports, this would be a simple and logical step for anyone who is serious about detecting unreported cash workers on a job. Referring to Mr. Dunbar, Johnston said:
What he would need to do, he would need to have cross referenced. Which it wasn't. He looked at the . . . [union cards], it was up-to-date, he handed it back and said thank you. It wasn't – he didn't look at the sheet and say – because then he would have known. I never heard of that happening there. Had it happened, then it would have been a whole different story.
Id. at 92.
In fact, Johnston testified, he had Carpenters who were not listed on the shop steward reports tell him that Dunbar had checked their union cards. (Id. at 90-92.) This, of course, undermines the argument frequently given that business agents are unable to find cash workers because they hide when the business agents show up. Certainly, hiding does occur, but clearly it does not account for all failures by business agents to identify unreported Carpenters on job sites.
Johnston testified that the business agents covering Tri-Built's Fordham University job site did use the shop steward report, but only to show it to him – the company's representative on the site – and ask him if it was consistent with his own list. (Id. at 79.) According to Johnston, the business agents for Fordham University, Martin Devereaux and Maurice McGrath, came to the site fairly frequently because it was close to their office. In addition to asking Johnston for his view of the shop steward report's accuracy, they would walk at least one of the floors and ask how everything was going. (Id. at 80.)
Johnston testified that, as to Tri-Built's Randall's Island job site, which was muddy and mucky, "[t]here wasn't much action of BAs coming on the island." (Id. at 133-34.) This was corroborated not only by shop steward John Scivoli, who testified that there was never a business agent at the site during the five-months Tri-Built worked at the site, but also by Bill Hanley ("Hanley"), the business manager for Local 157, who admitted to me on several occasions, the last time during his interview on May 18, 2005 (Memorandum of William Hanley Interview, submitted herewith as Exhibit 12 [not yet transcribed; to be submitted at a later date]) that since Local 157 business agents trusted the shop steward, business agents never visited the site. Hanley's statement to me was consistent with Scivoli's testimony that when he handed in his shop steward reports the only questions that the business agents would ask of him was “how things were going.” He would respond that things were fine and that would end the conversation. (Scivoli Deposition, Exhibit 6, at 15-17.)16
I recently interviewed Business Agent Danny Dunbar and, although I am critical of his performance, I also believe that what he told me demonstrates a failure by the District Council to provide adequate training to its business agents on how to root out wrongdoing at job sites. When I asked Dunbar if he had any paperwork reflecting the names of Carpenters he had "carded" and spoken to at the job site, he responded that he did not write down their names and he did not know whether they had been unreported Carpenters.17 Consistent with Johnston's testimony, Dunbar said that he did not compare the names on the union cards to those on the shop steward reports. (Dunbar Interview, Exhibit 8, at 3.)
On the subject of David Veltri, the KCH shop steward who had been corrupted by Tri-Built, Dunbar told me that he was made aware that Veltri had been interviewed by the District Council on May 17, a few days after the investigators' KCH "raid," but that no one at the District Council told him what Veltri had said. (Id. at 4.) Additionally, Dunbar said he had not been informed about the corruption that had existed at the KCH job site under previous Local 926 oversight. (Id. at 10.) If this is true, I find it extraordinary in light of the fact that this very job site had been the subject of intense law enforcement scrutiny, resulting in criminal dispositions associated with organized crime.18 It is troubling that the District Council did not prepare Dunbar for his assignment by adequately informing him of the immediate past history of the KCH site. It is also troubling that Dunbar did not confront Veltri about his inadequate shop steward reports and false statements after the raid by the District Council and II investigators.
David Veltri testified that there had been consistent violations, in the company's favor, of the 50/50 ratio during the KCH job and that Dunbar had been aware of this and approved it. (Veltri Deposition, Exhibit 7, at 85-87.) Veltri also testified that the number of names on his shop stewards reports spiked dramatically after the May 13 investigative raid at the KCH job site but that Dunbar did not question him about this. Nor did Dunbar question him about the discrepancy between the shop steward report and the number of Carpenters detected by investigators during the raid. (Veltri Deposition, Exhibit 7, at 142-43.) Rather, Veltri testified at this deposition and repeated in a subsequent conversation with Chief Investigator Sobocienski, that Dunbar and another business agent, Joseph DiNapoli, gave him a list of workers whom they found at KCH a few days after the investigators' raid, and told him that his next shop steward reports should contain all of the names on their list. (Id. at 143; September 30, 2004 Memorandum from Don Sobocienski, submitted herewith as Exhibit 14; October 1, 2004 Memorandum from Don Sobocienski, submitted herewith as Exhibit 15, at 1.) Mr. Veltri provided us with that list.19
Assuming that Veltri told the truth about receiving the list and accompanying instructions, and giving the business agents the benefit of the doubt, their furnishing Veltri with list might have been an attempt to deter future wrongdoing rather than a primer in how to avoid getting caught with an inaccurate shop steward report. However, this conduct certainly does not demonstrate a vigorous effort to discern whether Veltri had been lying to them all along, as he admitted months later, when he testified before me. Veltri himself was surprised that the business agents did not question him about the discrepancy between his shop steward reports and the list of workers they had found at the site: "I was waiting to hear, you know: Dave, this doesn't match, what the hell are you saying? Instead, it was: Dave, we went over each and every guy, we carded them and asked also for another form of identification, and this is who we found." (Veltri Deposition, Exhibit 7, at 143.)
During my long-delayed interview of Business Agent Martin Devereaux ("Devereaux") on June 1, 2005, I obtained from Devereaux's legal counsel fairly detailed daily business agent activity reports for 2001. These reports are exhibits to the transcript which will be submitted, collectively as Exhibit 17, at a later date. What this material shows is that although Devereaux, with other business agents, made several visits to Tri-Built's Fordham University site, where the shop steward was taking cash bribes to keep Carpenters off the shop steward reports, there appears to have been no investigatory follow-through on Devereaux's learning that the shop steward was absent from the site on more than one occasion and that a retired Carpenter was working at the site and not listed on the shop steward reports. Despite these indicia of wrongdoing, there was no attempt by Devereaux or his fellow business agents to investigate the extent of the wrongdoing at the time. To Devereaux's credit, he agreed with me that the procedures would be much different today than they were in 2001. The fact remains that had these business agents acted vigorously on the information available to them, it is likely that I would not have had occasion to write this report.
I have repeatedly said during my tenure as an observer of and advisor to the Anti-Corruption Committee, that every example of wrongdoing discovered at a job site should provide the business agents with an opportunity to draw lessons about how to avoid further damage to the District's Council's reputation. I hope that, with the guidance of the new II — who, I anticipate, will provide constructive criticism as I have — business agents will be given the training, support and leadership required for them to do their jobs as corruption fighters. Accountability for performance based on conformance with integrity-focused methodologies should be an important goal for the future.
Business agents intent on discerning the existence of wrongdoing should use their experience, judgment and common sense to develop techniques and methodologies for discovering it. Their role is not to be one of accommodation, cover-up or obfuscation of corruption on the job site. If they do not become more aggressive in uncovering wrongdoing and accurately determining its full extent, the District Council will continue to be embarrassed by outsiders, like me, pointing out wrongdoing and corruption that the District Council should have discovered on its own, years before.
Although the District Council’s delegates sought and obtained my termination as II, it would be a disservice to the union’s membership if the serious corruption identified by my still-incomplete investigation of Tri-Built were left unremedied. In my testimony before the Court and the parties on April 11th, 12th and 14th, I voiced and explained my disagreement with President Thomassen's strategy of delegating to public authorities the role of investigating job site wrongdoing. The foregoing, and my Boom Report, reflect my view that the District Council leadership and the Anti-Corruption Committee have yet to develop fully the will, competence and dedicated perseverance to discover and root out wrongdoing on Carpenter job sites.20
I wish the District Council success, under the new Independent Investigator, in delivering the level of performance and integrity that the union membership deserves.
Respectfully submitted,
Walter Mack
Independent Investigator
Amy Rothstein
Of Counsel
Dated: New York, New York
June 3, 2005
1 Because I have not completed my investigation and because the Benefit Funds and their hired investigator, Kroll and Associates, failed to cooperate when I attempted to obtain information, I was not able to determine definitively the location from which the shop steward reports were actually removed — whether, technically, the offices of the District Council or the offices of the Benefit Funds. However, a partner in the auditing firm which conducted audits on behalf of the Benefit Funds testified in a deposition that he believed that the shop steward reports were maintained by the District Council until it was time to forward them to the auditing firm, at which point the Benefit Funds assembled the documents for the auditor. (Deposition of Barrie L. Abrams, submitted herewith as Exhibit 1, at 136.) In any event, it is often difficult to distinguish between the District Council and the Benefit Funds because there is so much functional overlap between the two entities. The fact that their offices are on the same floor of the District Council's headquarters at 395 Hudson Street underscores this overlap. Because, for purposes of this and similar investigations, the distinctions between the two entities are essentially artificial, I urge the next Independent Investigator to ignore them and to seek immediately the Court's permission to proceed toward resolution of the issues I have tried to address.
2 The three deposition transcripts of McCaul and McGonnell are being submitted to the Court, only.
3 The information obtained in these and all other related Hot Line calls were referred to the District Council with requests for action and investigation.
4 This job site had been the subject of a major law enforcement investigation resulting in United States v. Moscatiello, et al., 03 Cr. 229 (U.S.D.C. - S.D.N.Y.). I received Hot Line complaints and intelligence information advising me that the District Council's investigation had been superficial and unavailing. When I recently sought the District Council's documents concerning its investigation of what I have termed “Kings County Hospital I,” I was told that they were either lost or in the custody of the FBI. I have not had time to pursue this matter further but firmly believe that this job site continues to warrant special scrutiny. Additionally, I believe that, although Tri-Built was not yet at the site when the facts giving rise to Moscatiello occurred, there may also be value in my successor examining and assessing the thoroughness of the District Council's early investigative efforts with respect to the corruption that led to these criminal investigations and prosecutions.
5 As I stated in the Boom Report, 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. I am sorry that we did not have the resources and time to do more with all of the information and the many suggestions conveyed to us during our tenure. I ask that those who favored us with their trust similarly cooperate with the successor II so that he or she can be effective and can challenge the District Council's Anti-Corruption Committee to elevate its performance so as to justify a similar level of trust, by the membership, in that body.
6 As the Court is aware from the litigation surrounding the Benefit Funds’ efforts to obtain the McCaul and McGonnell deposition transcripts, I was able to persuade Mr. Fitzpatrick to have his clients submit to these depositions not only on the condition that I would not recommend criminal prosecution of his clients if they cooperated fully in any investigation undertaken on the Court's behalf, but also based on the representation that counsel would have an opportunity to be heard with respect to the transcripts' release once this report and the transcripts had been submitted to the Court. I made it very clear that I spoke only for myself, not for the Court or prosecutors' offices. (See, e.g., Joint Deposition, Exhibit 2, at 5-9.) I respectfully urge the Court to hear from counsel for McCaul and McGonnell before considering whether to release these transcripts. I take full responsibility for my decision to seek information of such a sensitive nature and for my investigative judgment that it would be productive to obligate cooperating individuals to assist the Court's representatives on an ongoing basis.
Of course, contractors such as McCaul and McGonnell should also be held accountable for all of their civil law obligations; I have never permitted or encouraged a cooperating contractor to evade his responsibilities to the District Council or its Benefit Funds. I am currently considering whether the cooperating Tri-Built owners have honored their obligations to me and the Court by allegedly continuing to violate Tri-Built’s CBA with the District Council after making a commitment to cooperate. I will endeavor to communicate my views on this subject after I obtain some more information from the District Council and Mr. Fitzpatrick.
7 My office promptly provided the Work Schedulers we obtained, as well as a catalogue we made of the HSBC checks (and copies of requested checks), to an auditor assigned by the District Council to quantify Tri-Built's delinquencies in wages and benefits. As noted previously, the Benefit Funds refused to cooperate in my efforts to develop additional evidence with respect to Tri-Built, insisting on pursuing their separate investigation, conducting interviews and making findings that they have been unwilling to provide to me.
The fact that District Council auditors are assigned to determine both wage and benefit deficiencies is yet another indication that the purported distinction between the District Council and the Benefit Funds – whatever its significance for ERISA purposes – is an artificial one in the anti-corruption context. It has been invoked, I believe, in order to hinder my ability to determine how and to what extent Tri-Built and possibly other contractors were able to avoid detection of their routine CBA violations for such a long time. There was and is no good reason why the Benefit Funds should not have cooperated with the Court’s Independent Investigator to discover the facts. Again, I commend to my successor the importance of follow-up investigation and a report to the Court and the union membership.
8 Veltri received additional compensation in the form of being permitted on several occasions to leave early without losing pay. (McGonnell Deposition, Exhibit 3, at 41-42.)
9 Scivoli, who had health problems, was paid for a full 7-hour workday even on days when he worked only about five hours a day or when he was out sick. (McGonnell Deposition, Exhibit 3, at 68-69; Scivoli Deposition, Exhibit 6, at 16.) In addition, Scivoli was paid a total of approximately $200 - $500 per week in cash. (Scivoli Deposition, Exhibit 6, at 20.)
10 Although almost all of the District Council's investigative team appeared predisposed to accept Mr. Veltri's explanations as credible, Mr. Sobocienski disagreed and, in time, was proven correct. When Veltri testified before me on September 27, he admitted that he had lied to the District Council in the two sworn statements he had given them. (Deposition of David Veltri ["Veltri Deposition"], submitted herewith as Exhibit 7, at 130.) He admitted that he had taken cash to keep Carpenters' names off the shop steward reports (id. at 98-99, 119) and that on the day of the raid, he had hastily added Carpenters' names to his shop steward report. (Id. at 102-03.)
Time and time again, when District Council business agents or other District Council representatives were confronted with their failures to detect, investigate or eradicate job site wrongdoing, their explanations were based on assumptions and investigative methods that are shallow, sloppy and ineffectual. For an anti-corruption program to be effective, there needs to be vastly improved training for and accountability imposed on these District Council representatives. These individuals should have vigorous enforcement of the CBAs as their primary objective and must have the will to perform their jobs, on behalf of the union membership, with dedication and integrity.
11 Another KCH Carpenter, James Turley, told the District Council that he had approached Dunbar at the site because he was unhappy about being paid improperly, but that Dunbar had said that he would talk to him later. This did not happen, Turley said, even when Dunbar visited the facility on subsequent occasions. Business Agent Dunbar told me that he has no recollection of these events. (Dunbar Interview at 7.) I am troubled that, prior to the May 13, 2005 raid, there is no written record by this business agent of having checked the identity of Carpenters on the job site.
12 This individual told McCaul that he did not remove all of the shop steward reports in any one file because he was concerned that leaving an empty file would draw attention. (Id. at 73-74, 128-29.)
13 It is highly unlikely that McGonnell and McCaul would have fabricated a story that a Benefit Funds employee assisted them in this manner. Furthermore, other evidence, such as the inadequate audits, discussed below, substantiates this testimony.
14 Mr. Abrams, the auditing firm partner who gave a deposition, testified that missing shop steward reports were a common problem and that controls as to their maintenance were lacking. (Abrams Deposition, Exhibit 1, at 31-32.)
15 McGonnell’s and McCaul’s testimony suggested that the removal of shop steward reports affected earlier audits, but I am not sure that McGonnell and McCaul accurately recall the time frames. Indeed, their counsel has advised me that they are not clear about times, and I suspect that it was the third audit, conducted in 2002, showing a discrepancy of only about $7000 (as contrasted with a discrepancy of $36,537.56 for the audit period January of 1995 through December of 1997 and $277,440.33 for the audit period January of 1998 through June of 2000), that had, in fact, been impacted to the greatest extent by the machinations of the corrupt employee(s) at District Council headquarters.
16 The inattention to vigorous follow-up by the District Council is exemplified in the testimony of shop steward Pershing Venzen ("Venzen"). Although the events pre-date my appointment as II, I think it helpful to relate them here because it does not appear to me that the District Council's culture has radically changed since July of 2002, when these events took place. Venzen found workers, presumably non-union, working at his job site on a Saturday and attempted to have them removed by security guards. The workers telephoned the contractor and left the site of their own accord. Venzen left a voicemail for his business agent, Paul Tyzner, that day, and called Mike Donahue, another business agent, on Monday. Donahue informed him on Monday that he was being terminated at the company's request. (Deposition of Pershing Venzen ["Venzen Deposition"], submitted herewith as Exhibit 13, at 42-47, 80-81.)
Although the District Council filed a grievance against All-Trade Construction Group, it did not allege that Venzen had been terminated for diligently performing his shop steward duties. Rather, the grievance alleged only the facts that Venzen had discovered: that non-union men were working on a week-end, without a shop steward, and that the 50/50 rule was not being complied with. Only recently was I able to obtain paperwork pertaining to this request. While I have not obtained any documentation of the grievance adjudication itself, I did receive a Demand for Arbitration and Notice of Hearing (undated), scheduled for April 21, 2003 and an Order confirming the arbitrator's award, showing that District Council filed its petition to confirm on September 15, 2003. Since the underlying CBA violations occurred in July of 2002, it is not surprising that, as Mr. Rothman informs me, All-Trade Construction Group is no longer in business and collection of the $21,343 is "unlikely." Exhibit 16 , which will be filed at a later date, along with Exhibits 12 and 17, consists of: Mr. Rothman's May 25, 2005 facsimile cover sheet and accompanying New York State Supreme Court February 5, 2004 order; the July 15, 2002 grievance; the Notice of Grievance Hearing to be held on August 14, 2002; the Demand for Arbitration and Notice of Hearing for April 21, 2003 and exhibit thereto.) It is hard to understand why the District Council proceeded so slowly in following through on this grievance once it was filed. This lapse of time probably rendered the award uncollectible. Mr. Venzen, who had vigorously performed his duties as shop steward in this case, surely was ill-served.
Similarly, documents produced to us on May 18, 2005, demonstrated that the District Council had filed two other grievances against Tri-Built in 2002 and 2003, without taking any serious enforcement or collection action.
I believe that the current grievance process is seriously flawed and had planned to make it the subject of a future report. I urge my successor to evaluate the efficacy of the District Council's existing grievance process.
17 However, when Dunbar visited the site within a few days of the May 13 raid, he did list the workers whose cards he checked. (Id. at 4.)
18 As discussed in n.3, above, I have not had the time or the materials to examine the District Council's investigation and findings concerning this subject. I urge my successor to do so.
19 Dunbar denied that he provided the list to Veltri. (Notes of Dunbar Interview, Exhibit 8, at 6.)
20 I dare to hope that the writing of investigative reports will provoke some action to address issues raised in them unless, of course, the Court determines that reports by the Independent Investigator are not the preferred method of serving the Court's purposes. It was my view that detailed reports on specific areas that the union was not handling successfully would encourage and enable the District Council to take corrective action. I may have been mistaken in this view.

APPENDIX: EXHIBIT LIST
1. Transcript of Barrie Abrahms Deposition with exhibits
2. Transcript of Noel McCaul and Dermott McGonnell Joint Deposition with exhibits (filed only with Judge Haight)
3. Transcript of Dermott McGonnell Deposition with exhibits (filed only with Judge Haight)
4. Sample Work Scheduler
5. Transcript of Noel McCaul Deposition with exhibits (filed only with Judge Haight)
6. Transcript of John Scivoli Deposition with exhibits
7. Transcript of David Veltri Deposition with exhibits.
8. Memorandum on Danny Dunbar Interview on April 22, 2005 with exhibits
9. Amy Rothstein Affirmation on March 14, 2005 and subpoenas
10. Transcript of Victor Osario Deposition with exhibits.
11. Transcript of Eamon Johnston Deposition with exhibits.
12. Memorandum of William Hanley Interview on May 18, 2005
13. Transcript of Pershing Venzen Deposition with exhibits
14. Memorandum of David Veltri Interview on September 30, 2004
15. Memorandum of David Veltri Interview on October 1, 2004
16. Pershing Venzen grievance material
17. Transcript of Martin Devereaux Interview on June 1, 2005

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