Serial No. 105-140


Printed for the use of the Committee on Education

and the Workforce

Table of contents *

Statement of harris w. fawell, chairman, subcommittee on employer-employee relations, committee on education and the workforce, u.s. house of representatives *

Statement of donald payne, ranking member, subcommittee on employer-employee relations, committee on education and the workforce, u.s. house of representatives *




Appendix a - Statement of harris w. fawell, chairman, subcommittee on employer-employee relations, committee on education and the workforce, u.s. house of representatives *

appendix b - Statement of donald payne, ranking member, subcommittee on employer-employee relations, committee on education and the workforce, u.s. house of representatives *




Appendix F - Affidavit and photographs of Wayne garth Reed, member, american radio association *

Appendix g - National Labor Relations Board settlement agreement with the American Radio Association *

Appendix h - March 5, 1997 notice to employees and members of the american radio association regarding the REO Defense Fund $1,000 assessment *



Tuesday, August 4, 1998

The subcommittee met, pursuant to notice, at 1:00 p.m., in Room 2175, Rayburn House Office Building, Hon. Harris W. Fawell [chairman of the subcommittee] presiding.

Present: Representatives Fawell, Knollenberg, Petri, Ballenger, and Payne.

Staff present: Mark Rodgers, Workplace Policy Coordinator; Gary Visscher, Workplace Policy Counsel; Lauren Fuller, Chief Investigator; Peter Gunas, Professional Staff Member; Rob Borden, Professional Staff Member; David Frank, Professional Staff Member; Rob Green, Professional Staff Member; Bill McCarthy, Press Secretary; Marjorie Wasson, Staff Assistant; Brian Kennedy, Labor Coordinator/Counsel; Peter Rutledge, Senior Legislative Associate; Patrick Crawford, Legislative Associate.


Chairman Fawell. [presiding] The Employer and Employees Relations Subcommittee will come to order.


Statement of harris w. fawell, chairman, subcommittee on employer-employee relations, committee on education and the workforce, u.s. house of representatives

I'd like to thank the witnesses for taking the time to be here today. Let me say at the outset that we have invited officials of the American Radio Association to testify today along with the panel of rank and file members, who are present. Unfortunately, no ARA official or knowledgeable representative was able to break away from negotiations that they are, I understand, currently involved in order to be able to join us this afternoon.

So, due to the schedules of the witnesses who are here, and the importance of what they have to say, the Subcommittee is going to take their testimony today and as I have communicated to the Ranking Member, Congressman Payne, the Subcommittee will make every effort to also schedule a time to hear from the ARA officials at the earliest convenient time.

This is the third in an ongoing series of hearings on impediments to union democracy. The Subcommittee is examining problems union members are having in retaining a full and equal and democratic voice in their union affairs. Our ultimate goal is to identify possible areas in which the Labor Management Reporting and Disclosure Act of 1959, also known as the Landrum Griffin Act, might be improved to better safeguard the members' democratic rights.

The Landrum Griffin Act is intended to protect and promote democratic processes and the rights of union members, including the freedom to vote at meetings and to express any arguments or opinions, and to voice views upon union candidates and union business. The Act also protects members' right to financial information of the union and to participate in decision making, and to impose fiduciary obligations upon union officers, particularly in regard to the use of union funds.

I am going to depart just a bit from my prepared comments by stating that it's kind of sad to hear, as we have heard in previous hearings, which this is our third of a series of hearings of the many cases of the plight, I guess I would say, of union democracy. Professor Clyde Summers, who I guess one would refer to as the George Washington of union democracy, or the Abraham Lincoln of union democracy, when he testified before this Committee, rightly observed, and this is a quote from him: "Collective bargaining can serve the purpose of industrial democracy only when only if unions are democratic. Workers gain no voice in the decision of their working life if they have no voice in the decisions of the union which represents them." I think that really sums up the feelings, at least of myself, very much. I agree with those words and unions today, it seemed to me, can be so much more of a powerful voice in America if they took to heart those words uttered by Professor Summers in our first hearing.

And again, the same message was given to us by Herman Benson in our second hearing. Herman Benson, like Professor Summers, has worked for many decades both for collective bargaining, which they strongly back, and for union democracy. Both Mr. Summers and Mr. Benson are icons of the labor movement in America and they have been stalwarts with the Association for Union Democracy over the years which has fought many a battle for union democracy and was instrumental in bringing about the Landrum Griffin law back in 1959.

But their voices for further reform in the form of guarantees for union democracy are not being heard in recent years, despite the sad stories of the abysmal lack of union democracy which we have heard in this Subcommittee. I note the demands for union democracy and suggested legislative reforms submitted by the Association for Union Democracy by people like Mr. Summers and Mr. Benson back in October of 1994 to the Dunlop Commission. Ten proposals were submitted to the Dunlop Commission and I believe they all were ignored.

They advised to have reforms such as the direct election of national and international officers, LMRDA coverage of public sector unions, membership have a right to ratify contracts, protection from all forms of retaliation, access to union records, regulation of vacancies and officer positions, measures to level the election playing field, providing for attorney fees for prevailing plaintiffs, etc. These are elementary pleas for democracy in the operation of unions in America and they fall on deaf ears, even at the Department of Labor and in the U.S. Congress.

So it seems to me that unions are digging their own graves when they consistently fail to support such measures. Corrupt union officials are the worst enemies of industrial collective bargaining. They should be listening, not necessarily to this Subcommittee, but surely to the voices of people like Professor Clyde Summers and Herman Benson. Who can justifiably be against such pleas for union democracy as crafted by the Association for Union Democracy? We can provide the forum for workers to tell their stories, but the union leaders, and I think, perhaps, news media, have to take seriously these complaints, or union power will continue to slip in this nation.

So today's focus is on a very small union, the American Radio Association. And this union consists of about 200 radio operators scattered around the United States who work on vessels of the U.S. Merchant Marine for as much as six months each year and then when they're back on land, they would much prefer to be, I think, at home. And so, we look forward to the testimony that you will be giving to us and hopefully this will lead to some very constructive legislation. The Chair now recognizes the gentleman from New Jersey, Congressman Payne.


written Statement of harris w. fawell, chairman, subcommittee on employer-employee relations, committee on education and the workforce, u.s. house of representatives - see appendix a


Statement of donald payne, ranking member, subcommittee on employer-employee relations, committee on education and the workforce, u.s. house of representatives

Mr. Payne. Thank you very much, Mr. Chairman, I approached this series of hearings with an open mind when I heard that we would have a series of hearings regarding union democracy and impediments to its implementation. I had hoped that this subcommittee intended to conduct a balanced review of the Landrum-Griffin Act and the competing equities involved.

However, at the previous hearings on this issue, it became abundantly clear that at least some of the other side of the aisle consider these hearings nothing more than a part and parcel of on ongoing Republican attack on the labor movement and the rights of working people wherever they are.

We were told that previous hearings would provide a balanced view of the reorganization of the Carpenters Union. We all know that that union needed review, but when the Subcommittee conducted its hearing, its balanced approach consisted of six witnesses invited to criticize reorganization and one witness, the international president, invited to defend it against the other six who were all opposed. To me that certainly is not balanced.

It is expected that the majority would have more witnesses, but when you have a 6-to-1 ratio, that's not equitable. And we're not looking for the same number, we're just looking for striking distance. In an effort to address the imbalance, the minority invited one rank-and-file carpenter who favored the reorganization. At the hearing, a Republican member of the Subcommittee accused the minority witness of being a liar and being bought off by the union. Of course, no evidence was offered to prove these very, very serious allegations.

In addition, the same Republican member leveled accusations at a former Federal judge, accusing the judge of being involved with criminal conspiracies with the union's leadership. Again, no evidence was offered to substantiate these very, very serious allegations. Ironically, the accused judge was a Republican appointee. Despite this and despite the scandalous nature of the charges leveled against him, the former judge was not even afforded the opportunity to be present to defend himself.

This irresponsible behavior was sadly reminiscent of the partisan witch hunt taking place in another Subcommittee of this Committee. My Republican colleagues have made an art form of slandering retired Federal judges. Indeed, some members have attacked Judge Webster, a most distinguished person, and former Director of the FBI, and Judge Lacey, who is a former U.S. Attorney, a former Federal prosecutor, and a former Federal judge, who indicted and convicted a former Congressman who was the Mayor of the city of Newark and imprisoned him to break the strangle-hold of organized crime on the city of Newark. This Judge Lacey is a distinguished man. He's a Republican, but he's still a good man.


I just get concerned about some of the accusations. They've been accused by a member of this subcommittee and others of ignoring or avoiding facts in order to protect corruption. It should be noted that these allegations have been made without any substantiation whatsoever.

At a recent hearing on the so-called investigation of the Teamsters election, a Republican member accused an individual of destroying documents, and when that individual arrived at the hearing to deny the allegations, the chairman of the subcommittee refused to allow him to testify.

So these are some of the patterns that are regrettably par for the course in this sham investigation in that particular subcommittee, and I'm happy to say it wasn't this subcommittee, but another like this.

So, Mr. Chairman, I expect, and did expect more, because these are some serious issues of the rights of working men and women and I was hoping to get to the bottom. Where there is wrong, wrong has to be corrected regardless of what side these people support. Republicans want us to believe that they are truly concerned about the rights of the rank-and-file, yet this is the same group who have sought to bring back company unions, weaken over-time protections, weaken workplace safety protection, reducing the take-home pay of construction workers, stop an increase in the minimum wage, diminish the ability of unions and their members to participate in the political process and on, and on, and on.

If I may quote once more from our first witness in this series of hearings, the very distinguished and respected Professor Clyde Summers who said "Those who are not fully committed to promoting and encouraging the practices and procedures of collective bargaining have no standing to discuss, much less demand union democracy."

Before I close, I want to make it clear to the witnesses here today that I am in no way judging you, your testimony, or your character. You just happen to be here, but it has nothing to do with you. I'm pleased that you've all taken the time out of your very busy schedules to come here. My complaint is not with you, it's with the process and I will continue to make that clear. A process that should either be changed dramatically or stopped immediately.

Thank you very much.

Statement of donald payne, ranking member, subcommittee on employer-employee relations, committee on education and the workforce, u.s. house of representatives - see appendix b


Chairman Fawell. Well, I'm sorry if my good friend sees some bias in the way in which I have tried to conduct these hearings. The Association for Union Democracy has given us high marks on being very objective in what we have been doing. There were two minority witnesses at that hearing in regard to the Carpenters Union, not a 6-to-1, and today we tried to offer a three and three ratio, but there are no witnesses representing the minority here simply because, I suppose you chose not to have them or because the officials of the ARA are allegedly involved in collective bargaining, but are too busy to be here. But we will have them here if they will come here. And they'll have the opportunity to rebut any of the testimony that we will be hearing today.

So I think that at least this Chairman is doing everything I can to be very objective and I think that, all in all, we have been able to do that. So, that--


Mr. Payne. Mr. Chairman, will you yield the floor?


Chairman Fawell. --ends my comments.


Mr. Payne. I just wanted to indicate that when it became apparent that the persons that we wanted to invite were in negotiations, I sent a letter asking that the hearing be postponed so that everyone could be here at the same time, but as you recall, you wrote me back and indicated that you could not accommodate my request.

It is difficult to respond when people aren't here because we get much out of colloquies and back and forth. Certainly at the hearing on the carpenters' union there was a person that took both sides of the issue. When you said we had two witnesses, there was really only one witness that we had and there was a person who looked at both sides of the aisle. So, thank you very much for yielding.


Chairman Fawell. Well, the joint person was Mr. McCarron who headed the union, so I think, he certainly could be classified as taking a different view than the rank-and-file who were there.

The only reason we have to have the hearing today is Mr. Schalestock, and these other gentlemen, they go out to work. It isn't like even members of Congress, they're gone for six months and we would not be able to have this panel. So in order to get both, I guess we have to have separate hearings. I would much prefer to have five or six people out there and do this all at one time. But when you're gone for six months or more, it's kind of hard--maybe Congress could, maybe we could get on one of their ships and hold a hearing, I don't know. But it's rather difficult to do that.

Well, at any rate, our first witness this afternoon will be John Schalestock of Casanova, Virginia. Mr. Schalestock is a veteran of the United States Marine Corps, is a radio electronics officer in the U.S. Merchant Marine and has been a member of the American Radio Association for the past 25 years.

Our next witness, Jan Leja of San Francisco, California. Mr. Leja has been a radio officer and a member of the American Radio Association for the past 30 years. He has sailed on ships reactivated for the Vietnam War, has served on ships supporting our efforts in the Gulf War. He was relieved a few days ago from his latest job for reasons, he believes, are related to his criticism of the ARA.

Our final witness will be Walter Schultz of Jim Thorpe, Pennsylvania. Mr. Schultz is a former Navy radio operator and a former member of the American Radio Association. During a 26 year tenure with a telephone company, he maintained his license with the United States Merchant Marine and has served on vessels during the Vietnam and Gulf Wars. He has authored two books and numerous magazine articles on antenna design.

Witness who will appear before this Committee on Education in the Workforce and its subcommittees are asked to take an oath and to promise to tell the truth. Witnesses should be aware that under Title 18, Section 1621 of the United States Code, lying to Congress while under oath may be prosecuted under the law. In light of this, gentlemen, I'd ask that you please rise and raise your right hand.

[Witnesses sworn.]


Chairman Fawell. Thank you and please be seated. And Mr. Schalestock, we will commence the testimony with you. We're operating under what is called the 5-minute rule. I think staff has advised you that as the colors turn yellow and then to the red--the red's at the end of the five minutes, so you could sort of gage where you are and try to bring your comments to a close after that red light does go on. Mr. Schalestock, we'll hear from you at this time.




Mr. Schalestock. Mr. Chairman, Honorable Representatives, thank you very much for the privilege of addressing this committee. My name is John Schalestock. I am a radio electronics officer in the U.S. Merchant Marine and a 25-year veteran in good standing of the American Radio Association. I'm also a veteran of the United States Marine Corps of the Vietnam era.

I appear before you today on behalf of all ARA rank-and-file members, past and present, to plead for justice and to offer a real-world example of the failure of government to protect American workers from the corruption of labor union leadership so prevalent in today's workplace.

Mr. Chairman, this Committee has before it my written testimony that goes into greater detail than time constraints permit me here, but I'd be most happy to answer any other questions you or the Committee might have.

Suffice it to say that I am aware that your primary concern is to consider legislation that might aid future union members in obtaining government help in dealing with union corruption. I submit that the American Radio Association is a de facto example of how the rank and file are held enthrall by unscrupulous union officials and their rights corrupted and denied.

As the truth becomes the first victim in wartime, thus does the democratic process become the first victim of union corruption. It is axiomatic that without fair and honest elections, justice and, ultimately, the best interests of the membership are lost. The rank-and-file then become little more than serfs, serving at the pleasure of the entrenched leadership.

It is common knowledge in the maritime industry that in the ARA one man and one man only has retained total control of union money and affairs for the past 50 years. That man is William R. Steinberg, designated by his rubberstamp National Council as "President Emeritus" for life. His mandate provides him with remarkable authority over ARA's plans and money. Mr. Steinberg is also listed as Chairman of the ARA Pension Plan Board of Trustees, a pension plan that recently announced assets in excess of 99 million dollars.

Now in his eighties, Mr. Steinberg has allowed his son, union counsel Edwin Steinberg, Jr., to become the de facto Chief Executive Officer of the ARA. Mr. Steinberg, Sr. retired many years ago with a reputed cash-out of one and a half million dollars. Before retiring, his rubberstamp National Council passed an amendment to the union's constitution that provided that retired members could vote, as well as hold office, as long as they remained members in good standing. That is to say, their dues were kept current from the day of their retirement.

Mr. Steinberg now had the best of both worlds: a million dollar cash-out and retention of his position of President of the ARA. He, in fact, held this position until the 1992 election when under intense challenge from rank and file candidates, he named longtime friend and ARA Pension Plans Director, William Schuman, as his surrogate replacement.

This provision becomes a critical link in understanding how the election process has been manipulated over the years. It basically means that a retiree, with pension in hand and no fiduciary interests in union business, can vote and run for office if he continues to pay his dues.

Utilizing this provision, Mr. Steinberg and his son, Edwin Jr., have effectively controlled every aspect of the union's activities, from contracts to expenditure of union funds ever since. And they have never allowed the list of ballot names counted to be copied by candidates, as provided for by law.

Our profession is now in its twilight years, soon to be replaced by technology and international treaty. Thus, I appear before you today as a representative of a most honorable company of men, the lineal descendants of the Titanic's heroic radio officer, Jack Phillips, who continued to send his SOS, even as the waters rose around him.

I can tell you from personal experience that next to combat, sending an SOS from a sinking ship is one of life's most intense and lonely experiences. My brothers are good men. Many of whom have paid the ultimate price for their professional integrity and we deserve better than to be deprived of our future by greedy and selfserving union officials.

Mr. Chairman and members of this Committee, you, as the people's representatives of the world's greatest democracy, know better than most the sanctity of the ballot box. It is the wellspring from which flows the lifeblood of our nation's soul. And as Socrates observed, "Compromising democratic principle is like drinking a little poison. Ultimately, the body will sicken and die." Thus, any corruption of a balloting process inevitably destroys the membership it was meant to nurture.

I submit that the testimony you will hear and read today shows not only the ancillary consequences of this poison, but the toxic pathology of its insidious progression through our union's body and soul. The Steinbergs and their surrogates have always paid elaborate attention to the trappings of democracy. It is only when the thin veneer of ritual is pierced that the true corruption of the inner body's revealed. No one has ever disputed the arithmetic of their ballots, only their validity, for it is beyond dispute that he who controls the ballot process controls all. Most of all, the massive amounts of money that flow through this union every year. Everything else is shameful redundancy.

And so, the end result becomes a matter of historical record. Mr. Steinberg and his surrogates always run the election. Mr. Steinberg and his surrogates always win the election. This, then, is the state of ARA democracy as has been administered without exception for the past fifty years.

In list of these sad circumstances, Mr. Chairman, and for the sake of all honest ARA members, past and present, I implore this Committee to recommend that the Department of Justice take a page from the recent Teamsters precedent. I urge that the ARA be placed under federal trusteeship, the incumbents be removed from office, and a federally supervised election be mandated. ARA's fifty year history shows that this is the only mechanism left to the long suffering rank and file of this organization. For at the end of the day, a fair and honest vote is the only thing any ARA resistance group has ever fought for.

In conclusion, Mr. Chairman, I wish to express my appreciation to you and this committee for undertaking a review of this tragically neglected aspect of American unionism. Justice perverted is not only justice denied, but it is a deadly cancer eating away at the fundamental rights and entitlements of every American working man and woman. For your interest and help in redressing this tyranny, I sincerely thank you.

[The statement of Mr. Schalestock follows:]



Chairman Fawell. And I thank you very much for your testimony. Mr. Leja?






Mr. Leja. Mr. Fawell, ladies and gentlemen. My name in Jan Leja. I reside in San Francisco with my wife Juanita and two sons. I am an immigrant to the United States and, perhaps because of that, overly sensitive to issues of personal freedom, integrity, and honesty in the organizations that I associate with. These are qualities seriously lacking from the American Radio Association, the brotherhood of radio officers, a trade union I have been a member of for the past 30 years.

During these 30 years, I have sailed as a radio officer on several of the 185 ships reactivated for service during the Vietnam War, ferrying bombs to Saigon, Danang, and Vung Tau. I have also served on several of the ships supporting our efforts in the Gulf War against Saddam Hussein.

I am an experienced radio officer and from my own experiences I will describe incidents involving the American Radio Association, their abrogating my personal freedom, and the graft and corruption prevalent in this union, a trade union where its members are treated as serfs, and union money used as a personal bank account of the officials.

Incidentally, just a few days ago, by a fiat of the National Council, I was relieved of my job with the Matson Navigation Company, where I have been employed for the last six years. I suspect this was a retaliation to my criticism of the workings of the union.

May I bring to your attention the ownership of some real estate? In a 1970 speech to the ARA members, ARA president mentioned that the union, under the Four Freedoms Hotel Project, owned the President Madison Hotel on the ocean front in Miami Beach, along with another building housing 210 apartments across the street from the Madison, as well as a 310-unit building in Seattle on Aurora Avenue, North, with a further 320 units in Lafayette Park in Detroit, Michigan, and another 280 apartments in Philadelphia. And finally, 752 apartments in Patterson, New Jersey. Where did they get the money for all these purchases? Surely not from union dues, which are minuscule, but rather from the pension funds, the milk goat of so many corrupt organizations. And where are the proceeds from these buildings, may I ask?

If you are wondering why we did not vote these people out, let me describe another occasion. While I was home in San Francisco, I heard that a union meeting was about to take place in the now non-existent Jack Tar Hotel. Being curious as to what the meeting was about, I tried to enter the room where it was held, only to be told by a union official that I could not enter. No reason was given to me, a full-book member of the union with all my dues paid up.

I was making my way slowly back down the corridor when I met John Schalestock, another radio officer, and since that time, a very good friend of mine. While standing outside the meeting room where I was seeking sympathy from John, referring to my expulsion from the meeting, Harvey, the union official, searches us out and announces that the two of us would be allowed to witness the proceedings after all. But under certain conditions: that we have to do it from an adjacent room, through an open door, and we were further admonished that should we make any noises or gestures, we would both be asked to leave.

Our chairs were placed in the center of that adjoining room, making it difficult to follow any conversation outside. Towards the end of the meeting, which up to that point was uneventful, the union brought out this sheet of paper and told us that the members present, that they had to vote on this item, but that each member had to read it in silence.

The paper was passed from hand to hand, as each participant read its content. John Schalestock and I had no idea what was being voted on. This procedure took some length of time, but eventually, all members raised their hands and voted unanimously to approve the conferring of the title of "President Emeritus" or President-for-Life, upon William Steinberg. This honor had no stipend attached to it, and only incidental expenses of Mr. Steinberg incurred during his advisory capacities were to be reimbursed to him. I am told now that incidental expenses for Mr. Steinberg in 1997 equaled $220,000.

On another occasion, I was appointed by a court in New Jersey to witness and report on the balloting procedures of the American Radio Association. That particular morning, I arrived at the ARA union hall in New Jersey to be met by a young woman who introduced herself as my court-appointed lawyer. We filed into the union hall along with the ARA union members who were to conduct the ballot count. These members immediately started a verbal assault against me. One of those present was the retired ARA school director, who had to be physically restrained as he was going to attack me.

To prevent such further outbursts, the room was roped off on the orders of one of the union officials, leaving me and my lawyer hemmed into a corner away from the table. This prevented me from easy access to all points of the room and denied me the close proximity to the table where the ballots were to be counted.

The box containing the ballots was brought in. It was a plain, cardboard box about the size of a bread box, variously taped by duct tape, with evidence that it had been opened and re-taped. When I pointed this out to my lawyer, she consulted with the ARA lawyer, who told her that this box was used for many years and in many elections and taped and re-taped each time.

When the box was untaped once more and the contents spilled out on the table, I saw that several of the letters were opened. On my inquiry to this, the lawyer again went to the other lawyer who informed her that the bank where the mail was delivered had inadvertently opened the envelopes in the mistaken notion that this was mail intended for the bank.

As the ballots were being tabulated, one of the union officials approached the table and laid several additional envelopes there. Again, on my inquiry of this obvious violation of the voting laws, the opposite lawyer said that those envelopes were erroneously included in other ARA mail and should have been in the ballot box all along.

The official count finally started. I noticed that there were two printed lists being used to verify the status of the members. On my inquiry into that, I was told that when the membership list was printed, it was accidentally ripped in half. However, I could see that the alphabetical sort was not matching up. There were definitely two lists there. But my lawyer did not attach any sense of importance there.

As the count progressed, I noted that you could actually see right through the inner, secret envelope and see how each person voted. Several of the participants who had sent their votes in had taken the trouble to wrap carbon paper around their ballots so as to prevent their votes being observed. Again, my lawyer did not attach too much of an importance to this.

As we were departing, she told me she had gone to school with one of the three ARA lawyers present there and she had parted company with me now, as she had a ride with them. She got into the car full of ARA people and departed. I had never bothered to check her credentials. Overwhelmed by the brashness of the voting violations, and not feeling any support from my court-appointed lawyer, I failed to follow the judge's instructions to inform him of these violations. Instead, I flew home.

[The statement of Mr. Leja follows:]




Chairman Fawell. Well, I wish I could say that I never heard that kind of a story before, but we have, and I thank you very much for coming all the way from San Francisco to be able to relate that story to us. Mr. Schultz?




Mr. Schultz. Good afternoon. My name is Walter Schultz, retired Master Radio Electronics Officer and former member of the American Radio Association union. Let me tell you my experiences with the American Radio Association and my reasons for being here before the Committee today. I have witnessed total disregard for democracy in the American Radio Association. I have witnessed total disregard for the democracy--within the union and in the present power structure that has been in place since the union's beginning. The union officials work by subtle threats, namely manipulation of the shipping list, vacation pay, health benefits, and obtaining a seat in their maritime school.

Repeated mistakes are subtle, but become glaringly obvious to anyone who is a recipient of them repeatedly. Kowtowing is the only way to survive in this union. Not doing so leads to strange things happening to you. And the employment prospects become meager or disappear, foul-ups with your benefits, onboard ship accidents can befall you. As an example, you might fall over board at night, your person never found, missing until next morning. Nobody knows what happened.

Your example sets the pace for the rest. That's why there is very little opposition in this union. That's why I'm here before you. I intensely dislike the tyranny that I have repeatedly witnessed through my own experience.

As you know, there was a critical radio operator shortage during Operation Desert Storm. The Maritime Administration called upon the American Radio Association to fulfill its manpower requirements for the nation's Ready Reserved Fleet. I was one of those seamen who wanted to help out during the war. After the Gulf War, the American Radio Association's National Committee invited me to become a member for an initiation fee of $4,600 U.S. dollars. I accepted the offer, retiring early from the former Bell System.

Let me cite examples dealing with various plans administered by the trustee, who just happens to be the president of the union--convenient and legal under U.S. law.

Pension plan example one: After returning home from a voyage with Operation Restore Hope, I received a strange letter from an investment broker in San Francisco. The broker was writing the members of the union telling how the pension fund lost a million dollars in United States treasury notes. I thought this quite bizarre, since all our union pension monies were supposed to be strictly with John Hancock Company. I telephoned the broker and he stated the same again, offering no explanation how this could happen. He said the deal was done with William Steinberg, the President of the union. However, William Schuman was the President of the union, not Steinberg, at the time.

I immediately telephoned FBI Special Agent, Mr. William Redding, heading the task force on union corruption. He asked me to forward the original document from the investment broker to him.

Pension plan example two: During seven years of membership, I have only received two pension plan statements. Both of them were for Warren Schultz, and my Social Security number. I tried for more than two years to get that corrected. Only upon hiring an attorney did I get it corrected. While at the same time, yearly, I received a form letter from an accounting firm in New York City, asking me to release the union of any pension discrepancies by stating that my pension monies were in order.

Pension plan example three: I had to hire an attorney to get my IRAP, the Individual Retirement Account Plan, upon becoming permanently disabled, stemming from a voyage. The union refused to acknowledge any letter I wrote until my attorney became involved. The union later decided to pay my vested IRAP, $12,303 dollars, but not to pay other pension monies, since I did not have ten years vesting. This union has offered no other disability monies to help me.

Medical plan example one: My former employer had provided me with primary health insurance. The American Radio Association union tried to terminate my benefits from the company, however, their agreement with me superseded the American Radio Association's President determinations. The union's President refused insurance payments and to coordinate benefits until I again hired an attorney.

Medical plan example two: One had to maintain a certain amount of employment and vacation during a year. Failure to accomplish this left your family and you without medical and dental coverage. The union controlled employment through the shipping list, therefore you always had to be aware exactly what you said in public about the union leadership. The implicit threat of saying the wrong thing could deny you employment and medical benefit coverage. Even though COBRA coverage was offered, how could one play the premium having no money? How do I know this? The American Radio Association Medical Plan employee telephoned me without the union president's authorization to tell me she was ordered by the president not to pay any benefits to me. She put her job at risk in doing so and is now no longer an employee of the union. This situation happened to me on a few occasions.

Vacation plan example one: A member must request vacation pay in writing to the union. At times, weeks or months would go by without payment. Telephoning or writing the union did nothing to expedite the member's pay. In fact, the union refused to recognize there was a problem. One of the excuses offered was that they never received a certified or registered letter requesting vacation pay.

Vacation example two: Again, no vacation if money was to be made. During one union meeting, the president wanted a radio operator to stay on a ship for more than one year. He further stated he did not care about his well-being, but only the money contributed to the pension plan and the vacation funds by the steamship company through his employment.

The Maritime School in the Desert, educational benefit: The school was taught by a non-degreed, non-college educated teacher. The teacher was a nice guy, but had no formal training, experience, or credentials to teach whatsoever. The school was funded by contributions from the shipping companies. It is many of the members' belief that the school strictly was another tool by union officials to rip off money.

The Ruddy Radio Electronics Officer Defense Fund: Ruddy was a deceased radio operator who left the union approximately $500,000-$600,000 to defend a change in Federal law for the elimination of the radio operator on merchant ships. The membership at the union meetings demanded an accounting of funds spent. The officials refused to open the books. Furthermore, a $1,000 assessment was placed on the membership for the Radio Electronics Officers Defense Fund. The declarative statements by the leadership was "you will not be allowed to sail unless you pay $1,000 to us." I recognized this to be extortion. The explicit threat was "you don't pay us, no job." Moreover, other statements by the leadership implied successful ownership of one U.S. Senator through use of money and power. They became very bold about this.

Later, the NLRB ruled that only one member's money would be returned and that the union could keep the rest of the extorted monies in the REO Defense Fund from the members.

Final remarks: Finally, I want to convey to this Committee that the United States taxpayer is funding billions of dollars through maritime subsidies to the shipping companies. Moreover, the United States government has many military sea-lift contracts, paying millions of dollars to shipping companies to transport and pre-position military cargoes. This money ultimately ends up in union pension plan funds and corrupt union officials' pockets.

The Congress could do much to enact laws to stop these corrupt acts that jeopardize the civil liberties of union members and the national security of this country. I'm also asking for Congress to ask the Department of Justice to place the American Radio Association Union under trusteeship and audit its various plans. However, what is more important in the future, is laws that will protect and give immediate relief to any union member who makes a complaint. A union member should be able, in his locale, file a complaint and get immediate remedial relief without having to wait months and years. That's why we're here today. Thank you.

[The statement of Mr. Schultz follows:]




Chairman Fawell. I thank you, and I thank all of you for your testimony. I read the statements about a week ago and reread them this morning, and surely if all of this is accurate, and I have no reason to believe that it is not, I think your suggestions that the Department of Justice be asked to seek a receiver, to take over this union under the RICO Statute, as I would understand it, would appear to me to be reasonable.

I don't want to say that that's what we would suggest because we haven't had the opportunity of listening to others and the officials, and we do want to listen to them, but certainly the stories that you have told and others have told make you wonder how something like this could be going on for so many years.

Let me ask you this: The Department of Labor is supposed to be the objective receiver of complaints and the entity under the Landrum Griffin Act which is there to serve the workers. I know from the testimony of Herman Benson and I think also in the testimony of Professor Summers, they had little regard for the objectivity of the Department of Labor. Rather, they felt it was deeply biased in favor of union officials.

I think I probably know what your reaction is here, but I would like to have each of you just describe any relations that you had with the Department of Labor in attempting to bring notice to the Department of what you have testified in your respective testimonies.


Mr. Schalestock. Mr. Chairman, I'll be happy to address that. In my written statement, I go into greater detail about several experiences that we've had with the Department of Labor, but probably the most poignant occurred in 1992 when we protested the outrageous activities that took place in that ballot count in that election.

I'll preface it by saying that the local Department of Labor investigator in charge in New York was very sympathetic. He even stated to one member, one of our members that we had amassed one of the most comprehensive paper trails and evidentiary documents that he'd ever seen and he was going to forward those to Washington for a final determination. Under regulation, I believe, Washington had 30 or 60 days to respond and at the end of that time, there was no response. To make a long story short, this dragged out for nearly six months. And only when I contacted my Virginia State Senator, John Warner, who kindly wrote a letter on my behalf, was any response forthcoming. All forty of our challenge charges were dismissed, some with nearly contemptuous response, were glossed over and ignored. Bottom line, at the end of their three and a half page response was the conclusion that they were going to do absolutely nothing for us.

I offer this example as typical representation of the relief we've gotten from the Department of Labor over the years. The 1996 election was a duplicate. The 1996 election was challenged by the Recording Secretary of the Balloting Committee, himself. He tried to make a list of the ballot names counted. He was refused that right and he refused to certify under his name the validity of that ballot count.

I mention in my statement to you, my written statement, that the only relief we've ever received was from the NLRB with the thousand dollar assessment. Either by accident, design, or coincidence, this information was never promulgated to the membership. When the membership finally find out, there was a flood of demands for refunds, and the union leadership said "no, the statute of limitations is expired, we're paying you nothing." One man and one man only, to my knowledge, received the thousand dollar refund which the NLRB tacitly said was extortionary.


Chairman Fawell. Mr. Leja?


Mr. Leja. Yes, sir. I also called the Department of Labor down in Los Angeles and one of the questions he asked me is how many members do you have? So when I told him 160, he said, "My God, I don't have the manpower to look at some union that has 160 members. I'm working on a million and a half with the Teamsters." And he turned me down.


Chairman Fawell. Just, flat--


Mr. Leja. Flat out, just like that.


Chairman Fawell. Had there been other times when you've--


Mr. Leja. I have written to them also. Yes, sir.


Chairman Fawell. Have you had any cooperation at all?


Mr. Leja. Unfortunately, no.


Chairman Fawell. Mr. Schultz?


Mr. Schultz. I can cite two examples. Mr. Schalestock gave me a call regarding the last election. They had a complaint. So, I called the NRLB and the VOL in which the man in charge of the investigation in North New Jersey bluntly told me, "Do you know Federal regulations dealing with elections?" I told him no, but there's something wrong here, this took place. And he said, "Well, I don't really want to hear it. I went up there and everything's in order. You don't know what you're talking about."

Well, I talked to Phil Clegg of the ARA, he's one of the officials. He told me how he did it, bragging to me, he said, "We lay everything out on the table in an orderly fashion, label it, and when the investigator comes in, he looks at it, "Uh-huh, uh-huh," and, "Yes, everything seems to be in order." And out the door he goes.

So, what he was really saying to me is that if they lay everything out in order, the investigator doesn't have to work very much because the caseload that he may be carrying is very large, he isn't going to dig any further than superficially. He's done his job and he's out the door. And that's how they've been pulling a lot of this off. They just lay it right there on the table, so when the investigator comes in and they point him in the right direction and he looks at it. He may have a stack of papers and he knows that he's pressed for time, so he's not going to dig and he walks out and gives them a clean bill of health.

In the meantime, as a working member, I don't have the resources to know Federal code. I don't have the availability of what I want to do, the resources to continue an investigation, or know who to contact.


Chairman Fawell. Plus you're on the high seas for a--


Mr. Schultz. Yeah, and it makes it difficult.


Chairman Fawell. My time--I'll have further questions, but I just--I wanted to make sure I had the history correct. Mr. Steinberg was the president from 1948 approximately up until 1979 when he become--


Mr. Schalestock. 1992.


Chairman Fawell. 1992. When was he declared to be "President Emeritus?"


Mr. Schalestock. I believe that was in the late 1970's, if I'm not mistaken. It was at the convention that Mr. Leja was referring to that he and I attended in San Francisco.


Chairman Fawell. But as a retired person, he was still allowed to operate as the president and still allowed to have control of the basic trust fund, is that correct?


Mr. Schalestock. That's correct, Mr. Chairman. As I mentioned in my presentation, the union constitution allows retired people to vote and hold office, as long as they remain in good standing, in other words, dues paid from date of retirement.


Chairman Fawell. Is that usual?


Mr. Schalestock. I suspect that it's not usual and what makes it more egregious is that retired people have no fiduciary impact or consequence, no matter what the union does. Their pension is already committed and paid for and yet they are allowed to vote.

Probably one of the worst examples is, during the recent referendum, we were forced to vote upon a 150 percent dues increase. The NLRB, after we complained, found that fifty retired votes were used. My understanding is the margin of victory was 37 votes. I ask yourself, Mr. Chairman, and the Committee, would you vote yourself 150 percent dues increase on the right to work? It's very specious, in my opinion.


Chairman Fawell. Well, thank you very much. The Chair recognizes the gentleman from New Jersey.


Mr. Payne. Thank you very much. Once again, I apologize for missing your testimony, but I did browse through it here. But incidentally, I would not have had the privilege of studying it too closely anyway, since it was just faxed to our staff yesterday at 1:20. This prevented us from being able to really carefully look at the testimony. Of course, I'm sure that the Chairman had this information for many, many days.

Also, I'd like to ask unanimous consent to enter into the record a copy of the Department of Labor's decision upholding the 1991 and the 1996 elections of the American Radio Association and the National Labor Relations Board settlement agreement with the ARA.


Chairman Fawell. Yes, without objection, it will go into the record.


Mr. Payne. Thank you.

[The information follows:]


National Labor Relations Board settlement agreement with the American Radio Association - see Appendix F


Mr. Payne. Regarding our information, could I just ask you gentlemen, do you remember when you first heard when this particular congressional hearing would be held? It's important because we're looking at the difficulty in scheduling the other parties and I just wonder how much lead time you all had.


Mr. Leja. I guess I had about three weeks.


Mr. Schultz. About a week and a half.


Mr. Schalestock. I had probably a couple of months lead time on this.


Mr. Payne. Thank you.


Mr. Schalestock. Mr. Payne, if I might amend that. I just realized what you're asking. We only had probably two weeks to three weeks notice as to the specific date itself, just to clarify that.


Mr. Payne. All right. There are a lot of problems in this country, problems with labor unions, you got problems with corporations, problems with public officials, and wherever problems are we in the Congress that have responsibility in those areas tend to get to the bottom of the problem and let the chips fall where they may. When there is wrongdoing, corrective steps should be made. If there is need to indict or convict, those things should happen. So no one is trying to shun responsibility.

But I do feel, as I indicated earlier, and I feel very strongly about it, if we're going to get to the bottom of inequities, we've got to have a level playing field and we've got to deal with it with the goal of assisting working people and not to forward political agendas.

Let me ask, Mr. Schalestock, is it true that the Honest Ballot Association supervised and conducted both the 1992 and the 1996 ARA officer elections?


Mr. Schalestock. Yes, sir, that's true.


Mr. Payne. Are you aware that at an earlier hearing on the Teamsters, the Republicans represented the Honest Ballot Association as a model organization for conducting fair elections?


Mr. Schalestock. No, sir, I'm not aware of that.


Mr. Payne. Okay. Sometimes that's why we wonder about the inconsistencies of the statements that are made. And that's the thing that bothers me, because many times up here we say things that are irresponsible, and many times witnesses like you don't have any recourse and it's not fair. And I'm simply trying to get the right information.


Mr. Leja, you indicated that you are a court-appointed observer of elections. What year were you appointed?


Mr. Leja. I do not recall, but I don't think that you should characterize me as irresponsible for anything I say in here. Anything I've told you is the absolute truth.


Mr. Payne. Well, I didn't say anything about your being irresponsible. I wasn't even referring to you. I didn't hear your testimony. I read some of it. I was talking about us, up here. Not the witnesses down there. I made that clear before I left.


Mr. Leja. Thank you.


Mr. Payne. Absolutely. So I don't know where that notion came from. Was that election reviewed by the Department of Labor?


Mr. Leja. No, sir. This was when we used to belong to a parent organization called the Master Mason Pilots and because of some union troubles, our president decided to pull us out of the MMP, the Master Mason Pilots parent union. Some of us objected and took the issue to court. And the court appointed me as an observer for the ballot count that was to follow.


Mr. Payne. About when did that happen? That happened between 1990 to the current time?


Mr. Leja. You know, I'm in such a fever over here, I can't really recall my own name, let alone when it was there.


Mr. Payne. All right. We understand. And like I say, we're all friends, so we're not here to try to--


Mr. Leja. Thank you, Mr. Payne.


Mr. Payne. --intimidate anyone and I understand being on the other side--I've been there. And not only do you have to look up, but you've got important people running these meetings. I know the feeling.

Mr. Schultz, in your testimony, there were some serious charges regarding the administration of your pension plan by the union -not receiving plan statements, unexplained loss of assets, difficulty in ascertaining who the plan administrator is, issues which generally fall under the purview of ERISA, which makes any charge like that under the jurisdiction of the Labor Department.

Now, according to your statement, you contacted the FBI and so I would just like to know, one, have you heard anything since the initial contact and what was their response? And thirdly, have you made these charges to the Labor Department's Pension and Welfare and Benefits Administration which really has jurisdiction over this?


Mr. Schultz. All right, I'm going to try to answer that fourth matter in a forward way. Bear with me while I think about this. I contacted Mr. Redding. He had the information and had told me that the point that he thought a number of the union officials, in their opinion, but they hadn't proved it totally, were all gangsters basically looting the pension funds. But they were still investigating it. And I think this letter I have is from 1994 or 1995. I've heard nothing from the FBI since. They were supposed to come out and interview me, it never took place.

In regards to the Department of Labor, I dealt with them on three different occasions. Basically, they told me that the better part of me is where I sit, that's about what they think of union members. It's as if you're the criminal for making the complaint, not anybody else. Now, I don't know how you overcome that when you try to talk to somebody and convey this.

You must remember, and I think you understand, that we're working men and some of us don't have the greatest education and these fellows, when they receive a complaint, they hear somebody who's uneducated trying to make sense of what's happening to him, trying to take care of their families under the threat of not making a living, but they aren't able to articulate what's going on very well. So, being inundated with this on a daily basis, I would suppose, as an investigator or a person taking a complaint, say, "Gee, I don't want to hear this again. Here's another one." And that's how it is lost through the cracks that simply. It never goes any further than that because the investiogator doesn't want to hear it and closes this down.

So what do you do? I tried on three different attempts with the DOL to get something through to these people that something is wrong, and either my English is not good or how I convey what I'm trying to communicate to them is not evident to them, or they didn't want to handle it. Now, I don't know what the story is. It's a big organization. Maybe they just cannot do the work that they're supposed to.

There must be a mechanism put in place for some remedial action and that's one of the problems. You have people who are probably overworked and then you have a union who makes things easy for them when they come in and they can't find a complaint. Granted, they don't dig any further, probably. It looks good to them when they come in, so they said, "Gee, here's another guy that complained. There's no substance to this. Or it's marginal. Or it's within a hairline of the law. Should we go any further with this? No, we have bigger cases and bigger fish over here to fry. My boss upstairs wants me to take care of this problem because we're getting heat over here, and we should have taken care of this."

So when any of us call, they look at us, well, who are we? It's one small union. It's not one small union in a sense there's a lot of them. Billions and billions of dollars have passed through this union. So, that's my feeling in response to your question.


Mr. Payne. Well, I think that that's unfortunate. If you write to the Labor Department or to the other areas, you should get a satisfactory response. I certainly think that every individual is important whether in a big union or a small union.

If benefits are not being administered properly, I think that's very serious and as I conclude I'd just like to mention that I find it interesting that the subcommittee chair has really taken a strong interest in this and I'm very pleased because I'd like to also recommend that he take a look at Sears Roebuck and General Motors. These are big fish. Very big, big fish. Both of whom have terminated welfare benefits for a large number of their retirees, the people who are most in need, the people who are most counting on health benefits when they most need it and when it is most costly for them. Since there's such strong interest in this very small union, I'm looking forward to the Subcommittee convening a hearing, bringing in the CEOs of General Motors and Sears Roebuck and the other companies who have terminated or reduced, benefits for retirees who are on fixed incomes.

And so I expect that we will have that coming up in the future and I certainly would be happy to take information you have to the proper Departments and not only request, but demand that they get back to us regarding these charges that you have made.


Mr. Schultz. Mr. Payne, may I suggest that wouldn't it be easier to start by example with a small union, such as the ARA, to prove the validity of your statements, what you're saying. Here's a small union of 200-300 men, including retirees, and to see what's going on with these fellows and their leadership and show these big companies we can handle this one, and by example, because you know it's a starting point, and then say to these other companies, "Okay, you see what these guys did? You'd better clean up your act." But this might be a good starting point with ARA, because it's not so large of a problem to be able to tackle. It's something that can be cleaned up, I would think, in short order. You seem very able to me, and very knowledgeable. So I would hope that you'll really look into this and see what's going on.


Mr. Payne. Thank you very much. I think my time has expired.


Chairman Fawell. Well, I thank the gentleman from New Jersey and the Chair recognizes the gentleman from North Carolina, Mr. Ballenger.


Mr. Ballenger. Thank you, Mr. Chairman. For you gentlemen's edification, I'm the person that made the accusation, supposed accusation, about the judges showing a bias in the Teamsters here and I just thought I'd explain this to you here, so that you'd know who he was pointing his argument towards. And also, I'd like to explain that I spoke to the judges again last week and explained to them, "If this is what you heard," and I read to them what went on in that thing, "would you not automatically believe there would be a bias there?" And they didn't disagree with me.

The other judge was offered the opportunity to appear as a Democrat witness, but decided not to show up. So I just thought I'd give you a little background of where I'm coming from.

You know, I was reading the law itself. And in it, the Landrum-Griffin Act says, "A candidate is entitled to as many observers as necessary to observe the actual counting of the ballots. The observer may note the names and the vote of those voting so that the candidates may be able to ascertain whether unauthorized persons voted in the election."

The law says that you have every right to do what you have requested. And yet, Mr. Leja, you were not allowed to have any of those rights, is that correct?


Mr. Leja. That's absolutely right, sir. When I walked in, there was an altercation, which now I understand was pre-arranged, and both myself and my lawyer were separated from the table by a good distance by rope that held us back. So you couldn't really see what was going on.

In retrospect, I should have then just walked out and so the judge would have made a recount or whatever he would have decided. But I was not experienced, you know, I'm not used to handling these things, so I just stayed there.


Mr. Ballenger. You just haven't been in politics long enough to learn how to cheat, is what's wrong.


Mr. Schalestock, is there any record of what's in your pension fund? Do you know what rights you have in your pension fund?


Mr. Schalestock. Mr. Ballenger, you've put your finger on one of the most acute discrepancies in the smooth flow of democracy in this union. If you look at the IRS forms, many figures are labeled with such innocuous terms as "administrative costs," "other expenses," et cetera, et cetera, ad infinitum. To my knowledge, no member has ever been allowed to look at the books of this union. And I would submit that therein lies the tale. You do not get any information from innocuous terms like "other expenses" and "administrative costs," even though administrative costs for this tiny union at one point had run as high as a million dollars a year.

I would like to add, again, you're very astute in pointing out that part in the law, which I included in my formal charges to the Department of Labor on two occasions. This is the identical scenario that took place in the 1992 ballot count. A verbal disturbance was created and the candidates were forced to leave the room. It was as simple as that. When we tried to note, as the law provides, the names of the ballots actually counted, we were prevented.

In the 1996 elections, my understanding is that the same thing happened. The Recording Secretary of the Balloting Committee himself was refused the right to note these names and he refused to sign to certify the validity of that ballot count, to that extent.


Mr. Ballenger. Well, let me ask you a question about the vesting. It seems to me it sounds like a doctored system that they have in vesting it. You have to have ten years of service to be able to have vesting in your pension?


Mr. Schalestock. That's correct, Mr. Ballenger. As it stands, despite repeated requests from many of the rank-and-file members to reduce that vesting to five years, which is provided for by law, the situation in our union is, I believe, almost unique in the maritime unions. In order to get a full pension, you must accumulate 7,200 days of covered employment. That's twenty years at sea. Effectively, it means you have to have 25-30 years in the union to get your full pension or a lump sum cash-out.

We have a situation now where, if not the majority of members, a significant number, were brought into the union in the late eighties, early nineties, for one purpose, not to enhance our technical capability, but for the purpose of stuffing the ballot box. Our Constitution specifically prohibits these apprentice members from voting, and yet the incumbents allowed them to vote and their votes were counted.

And so, that's the situation that we face with these men. Knowledge is a two-sided coin. You can't bring people in on one side for technical ability and not expect them to use their brains, but to see what's going on and in a short order the majority of them realized the corruption rampant in our union and are adamantly opposed to it now.

However, under the vesting plan, they will see nothing until they reach the age of 65 and then, most likely, if the plan is still in existence, only a minimal amount is provided for by Federal insurance.


Mr. Ballenger. Well, it appears to me that if I'm managing your retirement account and I have the right to say how you vest over a period of years and so forth, and you're paying yearly a certain amount of money into the account, I might fix it so you couldn't get anything.


Mr. Schalestock. Absolutely. That could be the de facto consequence, but again, I would point out to the Committee that we are unique in the maritime unions. We have a literal sword of Damocles hanging over our heads. We are officially terminated by international treaty February 1 of next year. And so what is to become of us is an excellent question and one that the rank-and-file is acutely aware of and concerned about.


Mr. Ballenger. Well, let me ask you a question about the NRLB rule for one member, in which the thousand dollars was given back? But how many members put the thousand dollars in?


Mr. Schalestock. Every member that wanted to work had to write a check for a thousand dollars or commit to a thousand-dollar assessment, myself included. As far as the one member scenario, that came about because only two members' names actually appeared on the official complaint. When the NLRB ruling came down, one member, for his own reasons, didn't request a refund. Therefore, only the other member who actually received the thousand dollars. He promptly notified the rest of the rank-and-file that this had taken place, he published the NLRB ruling, and of course, everybody got on the bandwagon and wanted their money back, but the union official said, "No, we're not paying it back because the statute of limitations has run out."


Mr. Ballenger. Well, did the NLRB go along with that argument?


Mr. Schalestock. Yes, sir. To the best of my knowledge, they did. I believe several members contacted the NLRB and that is what they were told, that yes, in fact, the statute of limitations had expired, despite the fact that their ruling was never promulgated to the rank-and-file of the ARA.


Mr. Ballenger. Well, I was looking at the date of this notice to employees and members and so forth, and it's March 5, 1997. What's the statute of limitations on this particular thing?


Mr. Schalestock. That's an excellent question, Mr. Ballenger. I don't know. A figure bandied around informally was six months. But what the actual legality of it is, I don't know.


Mr. Leja. We are out at sea for six months, if you'll recall, sir.


Mr. Ballenger. Yes, sir. I understand that. No, it appears to me I agree with Mr. Schultz's idea that if you're going to clean something up and you know there's something wrong there, why not, as an example, take a small thing that can be done very easily. And it appears to me that it ought to be our duty to be able to back you all up and at least get the Labor Department to look into this situation because it appears to me that every member of your union, except that retired president, is getting the shaft.


Mr. Schalestock. I might add, Mr. Ballenger, I understand that your primary concern is addressing future legislation, so I would point out that under the existing situation the complainant has absolutely no effective input into the investigation. His process ends with the filing of his complaint. And it's been my experience that what takes place after that is that the Department of Labor will contact the union incumbents, or their lawyer in most cases, and then they decide what's going to be decided and then it's a de facto ruling handed down to the complainant. In other words, his letter of complaint is the only effective input he has into the process. And that is thoroughly flawed.


Mr. Ballenger. Right. Well, Mr. Chairman, this is a can of worms that somebody should have opened quite some time ago and anything that I can do to assist along those lines, I'd be happy to do.


Chairman Fawell. I would hope that Mr. Payne, I haven't had a chance to talk to him about this, might join with me to at least address a respectful letter to the Department of Labor and the NLRB and ask them to take a good long look at the situation which we have with this union.

I don't mean to imply that, in the entire area of the labor movement, you have nothing but this kind of a situation, but I do believe that what we have here is, as the gentleman from North Carolina, whose is often able to sum things up quite well: you have a can of worms.

And, the more I have looked at it, the more I have felt like a mosquito in a nudist colony. I don't know where to begin.


There are so many areas where I gather that none of you, in your efforts to try to determine how much money this union has, and they're about to go defunct, but I gather they're trying now to re-categorize the workers that they will be representing, and therefore, by redefining the workers that are eligible for membership in the union, down to even janitorial, because the radio operators are going to be no more, so they can continue this union for ad infinitum.

The one figure I saw was that there is at least $99 million alone in the pension fund, and a number of trust funds. Have you had any luck at all, by looking at the Department of Labor reports, being able to ascertain or otherwise learn in inquiries with the union what the total assets are of the union and what are your respective vested shares if, indeed, you've lived so long as to be able to invest? Have you had any luck at all in trying to find out just how much money do we, the the workers, actually own via this union?


Mr. Schalestock. No. No, Mr. Fawell, we haven't. As I pointed out in my written statement, we are only the latest resistance group in this union to fight for justice. Mr. Yerger, who is terminally ill, and unfortunately, can't be with us today, dates back nearly 50 years, himself, and has voluminous records in his files.

What we have found, and I believe you have evidence before you about the Miami office of Mr. Steinberg, is that there appears to be a vast network of interlocking corporations through which money is flowing that may or may not be ARA pension money.

It is such a can of worms, as Mr. Ballenger, so wisely points out, that amateurs, like ourselves, don't have a prayer of tracking this thing down. And I would add that, aside from being motivated by justice, we are under urgent time constraints and all members are going to suffer mightily. And, what we have, I think most succinctly put, is in the give-back, sell-out contract that provides us with the opportunity to possibly do janitorial work on the ship, is that the funds directed to the union itself and controlled by the incumbents, will remain at current levels for the next eight years; whereas our wages, real wages, are reduced by 40 to 50 percent.


Chairman Fawell. Now as I understand it, Mr. Steinberg was the creator of this union about 50 years ago, and has, in effect, been the president ever since? Although he did retire, he retained all of the powers of the presidency and all of the powers of releasing the various trust funds, including the pension. Is that correct?


Mr. Schalestock. Yes, sir. The latest listing on the pension plan Board of Trustees, that the membership has been provided with, provides that Mr. Steinburg, Sr. is the President of the Board of Trustees and it is our understanding that the traditional power balance in the Maritime Board--the Pension Board of Trustees traditionally provides for the union's representative to be the Chairman of the Board, both sides being equally balanced in membership, and therefore giving de facto control to the union in the disposition of their own pension funds.


Chairman Fawell. And, as I understand it, when Mr. Steinberg became president emeritus, which I gather was approximately in 1979, is that correct?


Mr. Schalestock. Yes, sir.


Chairman Fawell. That he was to receive no salary, no remuneration, but only reimbursement for expenses. Is that correct?


Mr. Schalestock. Yes, sir. In fact, at the time, and for years afterward, that was quite a political point that the incumbents would make, that we're not paid or we're not on salary, or we're not doing this on a salary, which was disingenuous to say the least.

The LN2s and the other IRS form shows that a good bit of money was being paid out of ARA funds, and is, I understand here in Washington, the favorite phrase goes, "if it walks like a duck and quacks like a duck, there's some money falling along behind it somewhere."


Chairman Fawell. The figures that I have, and I think some of this was in the testimony, which indicates the disbursement of the president emeritus going from 1997--1996, it was $94,000, he received; 1994, 1995, $175,000; 1993 to 1994, $64,000; 1992 to 1993, $16,000; 1991 to 1992, $27,000, for at least a total of about $409,000 since assuming the President Emeritus status and he also, apparently, is operating an office in Miami making about $57,000 per year, which is really leased out to three other people, at least, and, apparently, sits on the board of many of the entities that are or, may be, entities that are financed from the pension fund.

I guess that can't be certain, but you did testify to the number of properties which the president did indicate that the union owned and, apparently, he now sits on some of the boards of directors of those entities, and he apparently has complete control over investing, things of this sort.

So, he does seem to be, over a 50-year period of time, the man has been quite remarkable, and having a pretty iron-fisted one-person control and operation of the union, and has left, in his wake, an awful lot of dissatisfied members of the union. It's of great interest to me that a ten-year vesting is required--that's about as archaic as one can get, like a Model T Ford, with--anywhere.

I would think with any union or any business, with any kind of a conscious, and apparently you're giving the credit for only the periods of time that you're out on service? So, by the time you're 65, you'll be lucky if you have your ten-year vesting in.


Mr. Leja. That's right.


Mr. Schalestock. That's not only correct, Mr. Fawell. I believe the real consequences are even more outrageous because Federal law provides a caveat that all these vesting monies will be paid at normal retirement age if the plan is still in existence.

Some of these younger members are in their late twenties. If they wait 30 to 40 years to get their stipend out, I doubt that the elderly leadership of the incumbents in this union are even going to be around and, you know, God knows where the pension plan is going to be at that point.


Chairman Fawell. And they're always able to walk away with all those people who don't make the ten-year vesting. That's just clear profit for the union pension fund.


Mr. Schalestock. Absolutely. And no accounting to the rank-and-file has ever been provided of where all this money goes from the people that walk away.


Chairman Fawell. So, are you folks vested? Do you have or are you given a report so that you know what the value of your vested portion is?


Mr. Schalestock. Yes, sir. Within the past few years, I suppose probably the past five or ten years, there has been a move to, I would say, lend some legitimacy to the pension outlay, so that when you reach a 20 year vesting period--and that is 20 years of quarters, not the 7200 days--you have bought an annuity with John Hancock that's worth so much, and you get a statement from John Hancock every year as to the value of your annuity. But, it also brings up another interesting point.


Chairman Fawell. Are you apprised prior to the purchase of the annuity as to what the value of your vested interest might be, or any comprehension as to what the pension fund is investing in? Are there costs and expenses? Who's being paid the salary, consulting fees, things of that sort?


Mr. Schalestock. My personal feeling is that there has never been any adequate accounting to the rank-and-file, at least in terms they can understand, of where this money goes. Several years ago, we were hit with a loss and the explanation was that there was a downturn in the bond market. Nobody could quite comprehend that.

So, these little blips and stretches occur throughout the history and, again, we simply don't have the resources to get into the details of how it's being accomplished.


Chairman Fawell. There are so many other questions. I guess we have a vote. I just have one point more that I want to mention and that is, Mr. Leja, you have indicated you've lost your job now because, in your opinion, you had the temerity to come to Washington to testify before a congressional committee about this union?


Mr. Leja. That's correct, sir. Yes.


Chairman Fawell. What do you base that upon?


Mr. Leja. Well, I've been employed there for six years and never had any problem. But the thing--


Chairman Fawell. Is this with the shipping company, you mean?


Mr. Leja. This is a shipping company. Matson Navigation Company is one of the major trade routes between the United States and Honolulu in Hawaii. I've been there for six years, never had any problem, yet I received a note on one of those little yellow stick-em tabs, you know that you have for notes, saying where do you want to be assigned to now that you've lost your job, in essence. That's the way they announced it.

Now I did get a letter saying that I have been off the ship for more than three months. Therefore, according to a rule that is in the shipping rules, I am taken off the ship. But, that was only meant to apply during the time when there was no radio operator available. And if I had refused to go on that ship, the ship had no radio operator, so they had to assign another one and I would automatically lose my job.

But in today's day, when we only are allowed to sail 120 days and then have to get off for a job-sharing thing, that's insane. So, based on that, they took me off. I have written them two letters already in the period of a month. I have not received any reply.


Chairman Fawell. Thank you very much. I think we're going to have to adjourn, I guess, for a short period of time. I do have some other questions. We have other members due. I think while we have the three of you here, and I'm sure that Mr. Payne also has some questions, so, I think we'll have to stand in adjournment while we vote. Two votes, is that right? I think it will probably be about 20 minutes, let us say. So, the Committee is adjourned for 20 minutes.



Chairman Fawell. All right. We've done our duty and done some tremendous voting. And, once again, I want to express appreciation. We're taking advantage of you guys because you're here right now, and one of you'll be out on a ship for six months, and Mr. Leja, you've come here from San Francisco, so you're not in Washington everyday. Mr. Schultz, I'm not sure just where you reside, but--


Mr. Schultz. Jim Thorpe, above Allentown, Pennsylvania.


Chairman Fawell. That's right. So you're relatively close, but Mr. Knollenberg from Michigan is here and the chair would recognize Mr. Knollenberg for questions.


Mr. Knollenberg. Thank you, Mr. Chairman, and welcome panel. I appreciate your testimony.

I want to address this pension question, and if I heard right, and I've had it kind of pounded into me in the last three or four minutes that your pension requires a ten-year record of employment. But, I believe you said that that's employment on the high seas. It has nothing to do with years of service. How do they calculate your time on--I don't know which--Mr. Schalestock, maybe you could refer to that--this one I can refer to you. How do they count your time and give us an example of a given year?


Mr. Schalestock. Yes, sir. There are two factors that are added together: the actual days upon the ship and then what's called vacation pay. Probably the most common model would be 26 days vacation for every 30 days worked. So, if you work for 30 days, you would have 56 days of covered employment.

In order to get four full quarters per year, I believe the figure is now 224 to 225 days of covered employment to get a full pension year's worth of credit. Now, of course, this does not take into account that there may be long periods of time when you're not working at all and therefore not accruing any pension time whatsoever.


Mr. Knollenberg. Why would that be? Why would there be long periods of time that you wouldn't be working at all?


Mr. Schalestock. All our vessels, contract vessels, have what's called a permanent man assigned and those that are not assigned to permanent vessels, which is the majority of the rank-and-file, ride a list to fill in as relief men when the permanent man goes on vacation.

That ratio, I believe, has been traditionally held to about three to one--three men per job--which is, in good circumstances, a good relationship. However, under the new shipping rules that were put through in a contested referendum, you are limited to 120 days per year--120 consecutive days, I believe it is--and then you're required to be off for a full 120 days. This was ostensibly to provide more work, to share the work on a more equitable basis.

At any rate, the end result is that it makes it even more difficult to accrue accountable pension time and pension credits. So the ten-year vesting figure is very deceptive. It could take some men fifteen or twenty years to get ten years of vesting time.


Mr. Knollenberg. Is there a requirement that you retire by a certain age?


Mr. Schalestock. No, sir, there's not. We have--


Mr. Knollenberg. You could be out there at the age of 70 or 75?


Mr. Schalestock. As a matter of fact we have more than one that's living out there today.


Mr. Knollenberg. Do many of your members decide they're going to have to work beyond 65 in order to vest their pensions?


Mr. Schalestock. Well, I'll give myself as an example. I have approximately 25 years in this union, but I would still need another two years of fully covered employment, 365 days or two full years to get my full pension, a 7200-day credit.


Mr. Knollenberg. You're not going to walk away from that, are you--within a couple of years?


Mr. Schalestock. Well, no, sir. Under normal circumstances, I wouldn't, but our employment situation is under a sunset provision that, as of February 1, next year, there is no guarantee of employment and, in fact, we are all anticipating that we're going to be out of work by then.


Mr. Knollenberg. When you hired in were you given complete--a complete picture of precisely how this plan worked and what kind of time that you would have to accrue in order to get full vesting?


Mr. Schalestock. No, sir, quite the contrary. When Mr. Leja and I came into the union, 20 or 30 years ago, the veil of secrecy was literally impenetrable. You couldn't get any information about anything of significance or consequence and, of course, it was so hard to get into the union that no one was really adamant in pursuing those kind of details. We're just happy to be working.


Mr. Knollenberg. Then you never received any kind of annual statement that would produce information on where you've gotten to in terms of your vesting process?


Mr. Schalestock. Yes, sir. I believe within the past 10 or 15 years there has been an annual statement put out detailing one's existing or current vesting situation and then, again, the pension benefits have fairly recently been substantially transferred to John Hancock in annuities projected on the basis of so many years in.


Mr. Knollenberg. I understand though that, I think it was Mr. Schultz, had the experience where he received a statement indicating that the pension fund lost a million dollars via a U.S. Treasury note. What is the story behind the story on that?


Mr. Schultz. Well, I received a letter in the mail from a broker in San Francisco stating that they had lost a million dollars in Treasury notes or Treasury bills, whatever, and I was astounded by it. How can you lose? How can you lose?


Mr. Knollenberg. And they never answered that?


Mr. Schultz. Never answered. I called the man and he said, we lost it. I said, how can you explain that to me, and he couldn't give me an explanation. Then I asked him who did the deal, and he said Mr. Steinberg, the President of your union, which he wasn't at the time.


Mr. Knollenberg. Okay. Let me go to a question quickly on the Francis X. Ruddy Fund, so-called, or Institute for Advancement in Maritime Communications, Inc. Now, are any of you familiar with the way that Mr. Ruddy designated those monies to be used? Was anything ever printed and anybody can respond to this.


Mr. Schalestock. Yes, sir. Mr. Yerger, who unfortunately isn't here today and is a senior member and a retiree who is familiar with the situation and who has more information on it. The rest of us don't have anything detailed other than we know that the plan existed anb was listed as a union asset. And I can testify that members have repeatedly asked, at union meetings, as to the specific disposition of this money and no explanation was ever forthcoming. The only information is what you have before you on the LN2.


Mr. Knollenberg. You're talking about a sheet, which I presume is available for the record, that indicates that in the initial year 1991 there were $737,000 that appeared on the face and then, in subsequent years, 1992 and 1993, that total asset fund balance lowered substantially down to, in just two years, $313,000. Where did the money go?


Mr. Schalestock. That, sir, is a very excellent question.


Mr. Knollenberg. You don't know?


Mr. Schalestock. We have no idea.


Mr. Knollenberg. Nobody knows? All right, am I to believe that if it was 1993, and it was 313, today it could be zero?


Mr. Schalestock. I believe, sir, I would have to double check, but I believe I did see a document that indicated that the Ruddy Trust Incorporated was terminated and remaining assets were transferred to another corporation. I can't swear to that, but, to the best of my recollection, I think I saw that.


Mr. Knollenberg. Would that be the judgment of all of you, do you think? Would you all think in the same fashion on that?


Mr. Schalestock. Yes.


Mr. Knollenberg. First of all nobody knows what the designation was originally, and nobody knows today whatever happened to it except that you think it was terminated?


Mr. Schalestock. That's correct about the termination. As far as the origin, I believe, I believe, there may have been more than one Ruddy Trust. That's the most notorious. Mr. Yerger, who was 40 years active in this union says that he recalled, an old-timer, when he came in, had left money to the union and, of course, that's anecdotal, but as far as the disposition of money, no, we don't know or have any idea.


Mr. Knollenberg. My time has expired. I appreciate your comments. Thank you. Thank you, Mr. Chairman.


Mr. Schalestock. Thank you.


Chairman Fawell. And I thank the gentleman from Michigan. I do want to ask Mr. Payne if he will join me in a letter to the National Labor Relations Board asking them to explain the circumstances regarding case 20-CB-10033, which is the case that we've heard about today involving the $1,000 per member assessment that. It would be helpful to be able to have an explanation from that.


Mr. Payne. I'd be glad to take a look at it. I just heard this statement here and I would personally like to look at what the allegation and what the $1,000 fee was supposed to be and once I get a chance to look at it--

You see, we have not had the opportunity to all this information that the chairman had. So, when I have an opportunity to see it, I'd be more than glad to join you once I can find out what it is we're alleging.


Chairman Fawell. Well, I thank the gentleman and, by the way, I just spent most of the morning reading all these--


Mr. Leja. May I tell you about this, Mr. Payne?

I was called and I was told that I had to submit a $1,000 check, otherwise I could not go back to work. And when I asked them what the check was for, they told me that it was a political contribution--down here in Washington somewhere. And when I told them that I would like some input into where this money's going, they said that they knew best, and I'd better come up with $1,000 or otherwise, I can't go back to work, and that's the way it is.


Mr. Payne. Well, I thank you very much.


Chairman Fawell. The Chair does recognize the gentleman from New Jersey.


Mr. Payne. I certainly think that it's important that we take a look at the allegations. I think that people making political contributions, especially when coerced, is wrong. I think it's not uncommon, though, for leadership to determine, once they are duly elected or appointed some way, that they represent the workers and therefore make decisions based on what they see.

Organized labor donated about $35 million to the Democratic Party in the last election. There was a lot of investigation and talk about that. The interesting side of it, though, was that corporations donated close to $200 million--eight times more. And I have some friends that work in large corporations and, you know, they weren't where their money was going.

Labor gave 15 percent--15 cents on a dollar primarily, to Democrats; whereas corporations gave a whole dollar to the majority--the Republicans.

So I think that there's wrong on both sides. I think you should have some input as to where your money goes. I don't think you should be coerced; nor do I think that those corporations itemize their expenditures when you sign your contract. Many of them are good: contributions to the United Way, and I've worked, and I know people that work for large corporations. It's not unusual.

And, so, as indicated, $200 million, and we haven't had a single investigation by the Republican majority about that $200 million that corporations spent on the Republican Party in the elections in 1996. But, we've had an awful lot of hearings about that $35 million that the labor unions brought up. It doesn't make the one-eighth any more right than the eight times. It just makes it a lot bigger, larger, more devastating, and it is abusive if some labor leaders are taking enormous salaries.

I just looked at salaries of an organization in New Jersey. I'd like to see some hearings on that. Twelve CEOs in the same industry, the lowest man had an $8--$9.5 million salary last year, the highest was $15 million, the average salary of CEO's was $12 million, all in one industry.

The gentleman was saying that, you know, union leaders are not a CEO. It's similar to a CEO. It's a person that leads an organization. It's a person who's been entrusted with leading the group through, and, so, like I said, I'd like to find injustices--vestiges of it--wherever it is.

The thing that disturbs me is that it's just simply one-sided. I mean, we should hear your complaints and your problems and any indignation, or any kind of wrong things done to you, but I wish that my colleagues on the other side would also take a look at the bigger picture of abuses that we see on the other side because that's just as unconscionable and wrong.

Also let me tell you about vesting. In large corporations, there was never any less than ten-year vesting. I worked with a large company one time and ten years was the normal vesting period. I worked in city Government, as an elected official, I worked in county Government, as elected, and I worked in State Government as an elected official, all of which had ten-year vesting.

So I don't understand, unless my colleagues here haven't done anything other than sit in Congress, where it's pretty nice and comfortable, air-conditioned and trains drive you around if you've got to get somewhere quickly. But I did drive a truck and I did work at the Atlantic terminals in Wirehouse, Newark with my father, my grandfather.

I did drive a truck and, as a matter of fact, when I drove a truck for the teamsters, every thirty days I was laid off. Couldn't even get to the 31st day because the 31st day would put you in the union, period.

I worked there for ten, twelve years. Never got to 31 days consecutively. It was wrong, but, you know, the pay was pretty good driving a truck. I made as much in one day as I did all week teaching, so I had to drive the truck one day to make ends meet.

So I'm just saying that if you've had some other responsibilities in life, you might understand. You don't like them, but you're not shocked at some of these things that we hear. It's not uncommon. It's maybe not right. But, even in season, they may say, well, Payne, listen, we don't need truck drivers all year around. We need it during the summer--as a matter of fact, I was delivering beer. So they drink beer in the summer, and they drink beer around the holidays--Christmas time--so they say how could all of you be in the union all year round when we only need you for two or three, four or five weeks in the summer, when it's hot, and during the Christmastime, when people are buying a lot for Christmas parties. And, so, it sounded logical to me.

I guess it's similar with your industry; you go out, you come back. As a matter of fact, they're making them so large now--when they go out, they don't need to go back out for another half a year. Those ships are so large that we see--You were going to comment? Go ahead.


Mr. Leja. Oh, I was going to say I sympathize with what you're saying. My objection to this is that they split up my money in two and then give it to this side and give it to this other side. That is no longer a contribution, Mr. Payne. That's bribery. And that's what I object to. And I have no input on what that money is doing.

Also, you're talking about bringing in a large investigation on this. Let me put it in this context. You're a black man. You're very sensitive to social issues, right? Supposing, instead of having a look at the problems we have here in the United States, let's decide what we should do in Africa. Let's bring Africa into this. Would you agree to that? Of course, you wouldn't. You would want solutions right now.

Let's start with a small union like this one. Let's work on this one. Let's get this one right. Then you can go onto GM or whatever other motorcar company you have there.


Mr. Payne. I agree. I think that we ought to look at the small problems--but I do have to still contend that you've got hundreds of thousands of people that are being abused by some entities, and I think that is just as important. As a matter of fact, if you can uncover those big ones, you assist many more people in your investigation.

But, let me just conclude. I did hear my good friend, Mr. Ballenger, state earlier that Mr. Lacy and Mr. Webster stated they understood the allegations based on information Mr. Ballenger, had provided.

Just for the record, Mr. Ballenger made statements, and Mr. Lacy and Mr. Webster were offended by the statements and they raised the issue. It wasn't the reverse as it was implied, I think, by that statement by my friend who--


Mr. Ballenger. Would the gentleman yield?


Mr. Payne. Yes.


Mr. Ballenger. I wasn't trying to say I didn't make the statement, that it didn't upset them, but what I tried to explain last week, this, which is the second time, was if they had heard all of the things that went on before I made the statement, would they not have also assumed some sort of bias?


Mr. Payne. Reclaiming my time, that's why we don't move on rumors or hearsays. That's why we don't have hearings where just one side comes because I'd like to hear what the other side has to say and to be as experienced--and I've heard you talk about your experience as a very successful businessman. Evidently, you've done a lot of things right or you wouldn't be as successful as you are in your community, in your life, in your business. You should be proud of what you've done.

I just can't understand why a person, as sophisticated and knowledgeable as you are, would make allegations against a former U.S. attorney, a former prosecutor, the former head of the FBI, based on something that someone said rather than either confront them. I've never sat before a more distinguished panel of people other than Mr. Lacy or Mr. Webster. I mean, all of them were appointed by the Republican party and, by and large, they had nothing to do with these people.

Mr. Webster and Judge Lacy are people that are very, very large in their importance. And, so, that's why I was shocked at the statements that were made without hearing their side, because we can hear or read anything. I don't think all Republicans are bad, but I read some stuff that says they're all bad, but I would never say that. It's probably the same thing on your side.

And, so, that's the only kind of surprise that I had was that statements would be made about people of such distinguished backgrounds without hearing what they had to say.

I guess my time is about expired, but, like I said, we would just like to add for the record the summary of the annual report of the ARA welfare plan from January 1, 1996 to December 31, 1996 for the record. And I hope it's without objection.


Mr. Schalestock. Mr. Payne, may I make one comment on something you said?


Mr. Payne. Yes, sir.


Mr. Schalestock. I noted that you said, and correctly so, that the duly-elected officials of a union are entitled some latitude in their administration of union funds. Sir, I would reiterate that it is our unanimous point, to us the essential point, that duly-elected is the operative phrase. That is the whole basis for our presence here today.

We do not feel that the electoral process has been legitimately fulfilled. That is the basis from which all things flow, and that is our point in being here today.


Mr. Payne. Well, that's a good point and I think that that should be investigated. But, like I--my point was that it's certainly not uncommon that those who are--whether elected appointed, whether they're the CEO, whether they're the head of the corporation--tend to, by virtue of they are captain of the ship so to speak, in your terms, at the helm, you know, they tend to be able to make the decisions and they tend to make it based on what they think is best for them.

So, I'm not surprised that the $35 million, by and large, that unions--although many teamsters, laborers--many unions have not supported Democrats, but, by and large, the majority of them have, only because we fight for the working people.

The corporate folks have given 100 percent to the Republicans, and, like I said, it's just that there are more wealthy executives. As I mentioned, it's $15-to-9 million salaries of these executives in one state, in one industry. Unbelievable. And they're laying off people, though.

Somehow, if we can get justice in this thing, I think everybody would be better off.

Yes, Mr. Schultz?


Mr. Schultz. Mr. Payne, you know, I hear what you are saying and, as my mother said, two wrongs don't make a right. In your case, I understand.

The problem here is that these fellows may have had too much latitude and it's interesting to hear your views on this. From the standpoint of the late Senator Barry Goldwater who stated and spoke for the silent majority that unions tend to contribute in a PAC fund, like other corporations do, to people to make them see their way or help them out, may be detrimental, in my political viewpoint.

Perhaps some legislation is in order to just get rid of PAC funds--eliminate this-- the poison.


Mr. Payne. I'd love that. I get very little of it, so it'd be all right with me.


Mr. Schultz. You made your point. I guess that's what I'm saying.



Mr. Payne. Okay, and as a matter of fact, I knew that Mr. Barry Goldwater was really right when he decided to really see things the true and right way during his last months on earth.


Mr. Schulz. It's been kicking around for how many years since the Senator was in the Capitol Building and since he left office and retired? And this is the same issue that has been kicking around and, unfortunately, here we are. We see people who took latitude. We believe they took latitude and you see it, too, in your career. You work many jobs. Nobody should have to worry what they say or what they do to seek employment. You should be able on your merits to make it.


Mr. Payne. You're right. As a matter of fact, I was a waiter. I was a bartender. I was a custodian. I was a truck driver. I was a forklift operator. I was a school teacher. Oh, I could go on and on. But, one time a fellow said to me, well, gee, evidently you couldn't hold a job, so, I don't usually say that too much anymore, but, anyway, it's good to talk to all of you.


Chairman Fawell. Well, thank you. I want to try to steer this back to something maybe a little more relevant to the issues, but--



Mr. Payne. Well, I'm just following you guys.


Chairman Fawell. In the testimony that I read today, there was reference to Mr. Steinberg's consulting fees having run into the hundreds of thousands of dollars and the Price Waterhouse audit showing that Mr. Steinberg was, at one point, being reimbursed by the union for the luxury auto rental, and that his country club dues were being paid for by the union membership. Do you have any knowledge, I forget which one of you could testify to that? I think Mr. Schalestock, you were the one that made that statement. Could you elaborate on that?


Mr. Schalestock. Yes, sir. The Price Waterhouse audit is a direct quote from the International President of the Master, Mates and Pilots, Captain Timothy Brown, in an open letter to the ARA. I believe you have a copy of it in your document file there, that the hundreds of thousands dollars in consulting fees refers to, I believe, the amounts paid to Mr. Steinberg after concluding the most recent contract negotiations. I believe he was with the American Ship Management Company. That figure was included in an accounting status that several hundred thousand dollars was paid to him for consulting fees.


Chairman Fawell. From whom?


Mr. Schalestock. I would assume from the ARA treasury. I believe it was delineated as expenses that were reported as such.


Chairman Fawell. All right. And this Miami office, which is costing about $52,000 per year, this is an office being maintained by Mr. Steinberg?


Mr. Schalestock. Our only knowledge of the office is the evidence before you and the LN2 forms that list it as a deduction or as a figure being paid for the purpose. We have no further knowledge as to the actual use or disposition of that office or where the money is actually going.


Chairman Fawell. I gather that there are three other entities, though, that are subleasing that office, also.


Chairman Fawell. Yes, sir. That's correct. I believe you have pictures that verify that, before you.


Chairman Fawell. Now, what other trust funds are there aside from the pension fund?


Mr. Schalestock. This is a question I couldn't answer with authority. It's, from our perspective, impossible to get definitive accounting for any of these funds.


Chairman Fawell. There is a severance trust fund, as I understood it--


Mr. Schalestock. Yes, sir. That is probably another of the more recent egregious actions that have taken place. Traditionally, at least in this industry, when a ship is laid up or sold, or the crew is terminated, a severance pay of, oftentimes, substantial amounts, are paid to the men who lose their jobs.

As of the last memorandum of understanding, the definition of severance was redefined so that all severance pay now goes to, I believe I quote correctly, existing ARA accounts or trusts and/or others to be so designated. In other words, funds controlled by the union incumbents to the detriment, I should say, to the re-directional way from the individuals who normally would have gotten that money.


Chairman Fawell. What does the union do with the severance trust fund money, then? Hold it for payment to the union members when they actually are severed?


Mr. Schalestock. This has never been defined as such. We have no idea where that money will go eventually or the eventual disposition of it. Given the current climate of termination or lack of new contracts, potentially we're looking at quite significant sums of money that may come under that severance definition.


Chairman Fawell. All right. Mr. Ballenger, do you have any further questions?


Mr. Ballenger. Yes. My understanding is that Mr. Knollenberg spoketo you all about this Francis X. Ruddy Institute for Advancement of Maritime Communications? That was a man who died and left the money to the union?


Mr. Schalestock. Yes, sir, and I would suggest that he was probably representative of his generation. This industry has traditionally had many reclusive individuals who spend their entire lives aboard ship, living a rented room on a shore, thus amassing considerable money, and when they die, will maybe donate it to their union or some other area. I don't think it was unusual.

As I mentioned earlier, our older member recalls hearing of some--another fund like that many, many years ago. So, we really don't know how many of these funds have ever existed within the ARA. It's just that the Ruddy trust is the most notorious.


Mr. Ballenger. It was set up by the union leadership to put the money into, and it turns out that they hired somebody here in Washington, named Mimi Dawson?


Mr. Schalestock. I don't know that name, personally, but judging from the forms that money was expended here in Washington, and my understanding is that investigation has shown that she was retained to lobby.


Mr. Ballenger. Well, it's kind of strange. At first she was--the expenses were listed as public relations, education material, Washington consultants for FCC and legislative. The first year they spent $12,350 and next year they spent $218,000 and the next year they spent $244,000. That's just the specific area, the public relations part of it. How you can take an institute and spend that kind of money here in Washington? I can figure out how you can do it because a lot of it passes right through this building, you know, as you might gather. But, it seems to me, somewhere along the line, it's your money. Because it belonged to the union, it should have gone into some kind of trust fund for the members or something like that. But it appears it was put into a kind of a slush fund here in Washington.


Mr. Schalestock. Yes, sir. That is our opinion and observation, also, and I might add that requests for information at rank-and-file meetings have been repealed. They were rebutted or refuted to me personally, for one. I've requested to know, specifically, where this money went, and Mr. Schumann's response at the time was, are you aware? Go figure.


Mr. Ballenger. Mr. Chairman, I'd like to first of all apologize to these three gentlemen because of the personal problems that came because of my mouth at previous hearings and it shouldn't have had that much to do with this one, but I can understand people feeling that way. But I, personally, feel that a small situation like your own, as a businessman, if I were going to solve a problem, and you had the AFL-CIO or some big union that you might have a problem with, but you don't know for sure, and you have a little teeny union that's going to go down the tubes in February if something's not done, it seems to me that common sense says this is an ideal place to look into what's going on. And what's going on in my--


Mr. Schalestock. Yes, sir, you're absolutely correct.


Mr. Ballenger. And, Mr. Chairman, I don't know how the minority member feels along that line but it appears to me we have a chance to really serve a few people that are going to lose everything if we don't.


Mr. Schalestock. I might also add, Mr. Ballenger, that, not only is it manageable in terms of size, but in terms of prestige, it would be overwhelming. This is one of the most well-known names in the maritime industry for the past 50 years. Mr. Steinberg is legend and to give him his due, well deservedly so, in the early years when he formed this union.


Mr. Ballenger. Thank you, Mr. Chairman.


Chairman Fawell. And I thank all of the witnesses for being here. I think we do have an opportunity to be able to do something here. I hear my good friend, Congressman Payne's admonition that those who have not been staunch backers of labor, and I guess I would fall into that category, perhaps, should not be the ones who would lead the battle for union democracy. And I don't intend to.

I'm leaving Congress, by the way, voluntarily, and, so as of January, I shall no longer be a member of Congress, but I think that what I would lean upon is what Professor Summers, what Herman Benson, people who are, as I indicated earlier, icons in the labor movement who have been, for a number of years, pleading for Congress and the Dunlop Commission, a few years back, to take a look at union democracy and, you're saying that if you want a strong labor movement that would have respect from all people, and that will be able to really do a much, much better job, then you ought to be for union democracy.

Now I can't be a cheerleader, but Congressman Payne can be. And, I would hope that others, on the other side of the aisle would also recognize this. I hope that we'll have some legislation that we can introduce, shortly, and hope that the sleepy press that talks about Monica, but doesn't catch on sometimes to some of these very important issues, would also recognize that we have a window of opportunity here.

We're doing, not just Professor Summers and Herman Benson, but a lot of other good people; folks like you, and the men and women who have come here, union members, in mass numbers when the large unions. When you get to a small union, of course that's not the case.

They're saying, look, let's make us better. Let's make the whole movement better, and labor officials didn't take the lead in passing the Landrum-Griffin bill in 1959. They were kind of dragged along and pulled along, but there was a bipartisan move at that time and I think that there is a need, right now--not a need for the Republican or the Democrat Party--but a need for labor to recognize that it has to put it's own house in order or into the first decade of the next century, there won't even be a labor movement, I don't think.

You can't continue when you have the embarrassments that we have in the teamsters, and others. That doesn't reflect how the working people of American feel. I started out in the hood carriers' union as a common laborer. I was a plumber's assistant. I've done a lot of work and I've been in a number of labor organizations, and, you know, I came up the hard way too, in little old West Chicago, Illinois, where everybody was out of work during the great depression and so forth and so on. And, I had just about every job you can think of.

So, you know, we all have done our little bit of suffering, but we can get together here. We ought to be able to get together and not battle. Not be Republican or Democrat, and just say we've got a chance when you three people will come and travel long distances in the case of some and giving up an awful lot, and you've been battered around and pillared.

So, we ought to, out of respect to you, out of respect to the other people who have been here, and out of respect to union leadership, we ought to be able to get something done.

So, I thank you very much. You're a part of this. You've made a good contribution. I hope we can have some legislation ready before this Congress is done with and if it doesn't pass this time, we've got a bill all set that Congressman Payne can champion come the next Congress when he will be--


He's reelected by unanimous consent, you see. So--


Mr. Payne. Before you conclude, just quickly, because you should have the last word. I just want to say that there certainly has been a lot of bipartisanship. The Taft-Hartley law was passed by Mr. Taft and Mr. Hartley, who are both Republicans. Now there are parts of it that I don't like, but it was something that came up with a consensus. So, I'm not saying that all Republicans are anti-labor, and the Davis-Bacon Act was the work of two Republicans.

Mr. Hartley Ashley represented the district I represent. He represented it for 30 years, perhaps, or longer and then he was followed by Congressman Rodino for 40 years. I mean, this district has had very few changes. Hopefully, that will remain.

But, when we hear about this $215,000, which is a lot of money, and also, Mr. Chairman, if we could get the records and the information that you have, perhaps, I could be in a more of a bipartisan spirit, but much of the material you're reading from, none has passed our eyes. But--I just want to say this, $215,000 is an awful lot for a small union.

Let me tell you, though, how outrageous monies that influence politics has become. In less than 60 days a million dollars a day was spent by the tobacco industry; forty million dollars spent in about a month's time--month and a half's time--forty million.

The tobacco industry said smoking is really not injurious to children's health, it's just a way to get taxes. Forty million dollars spent in two or three-month period from the tobacco growers, from down south.

So, we look at $215,000; that's an awful lot of money to be spent in a year. Forty million to be spent in two months or so to defeat a proposal to make tobacco industry pay for the havoc that it's wreaked on our population. So I just throw that out once again.

My colleague would say what does that have to do with this? Well, it has a lot to do with it. A lot of money gets spent around here and it's wrong, and it's unfortunate, but it happens.


Chairman Fawell. Well, all right, and I thank the gentlemen. Let's say we've got that opportunity here and I think if we really want to, we will be able to achieve something. So, again, thank you very much for your taking part and this is democracy at work, you know. It clinks and clanks along. It doesn't look too beautiful, but somehow it gets the job done. Thank you very much.


Mr. Schalestock. Thank you, Mr. Chairman.


Chairman Fawell. The record will remain open for a month and any further comments that you would like to render, please feel free to do do so, and, Mr. Payne, I might just ask you that if the union officials would like to submit something, they might do so also.


Mr. Payne. Thank you.

[Whereupon, at 3:50 p.m., the subcommittee adjourned subject to the call of the Chair.]