OPENING STATEMENT OF CHAIRMAN PETE HOEKSTRA, SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS, COMMITTEE ON EDUCATION AND THE WORKFORCE *

TESTIMONY OF GARY L. KEPPLINGER, ASSOCIATE GENERAL COUNSEL FOR ACCOUNTING AND FINANCIAL MANAGEMENT, GENERAL ACCOUNTING OFFICE; ACCOMPANIED BY THOMAS H. ARMSTRONG, ASSISTANT GENERAL COUNSEL, GENERAL ACCOUNTING OFFICE *

TESTIMONY OF STEPHEN R. COLGATE, ASSISTANT ATTORNEY GENERAL FOR ADMINISTRATION, U.S. DEPARTMENT OF JUSTICE *

APPENDIX A-WRITTEN STATEMENT OF CHAIRMAN BILL GOODLING, COMMITTEE ON EDUCATION AND THE WORKFORCE *

APPENDIX B- WRITTEN OPENING STATEMENT OF CHAIRMAN PETE HOEKSTRA, SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS, COMMITTEE ON EDUCATION AND THE WORKFORCE *

APPENDIX C- WRITTEN TESTIMONY GARY L. KEPPLINGER, ASSOCIATE GENERAL COUNSEL FOR ACCOUNTING AND FINANCIAL MANAGEMENT, GENERAL ACCOUNTING OFFICE; ACCOMPANIED BY THOMAS H. ARMSTRONG, ASSISTANT GENERAL COUNSEL, GENERAL ACCOUNTING OFFICE *

APPENDIX D- WRITTEN TESTIMONY OF STEPHEN COLGATE, ASSITANT ATTORNEY GENERAL FOR ADMINISTRATION JUSTICE MANAGEMENT DIVISION *

The subcommittee met, pursuant to call, at 10 a.m., in Room 2175, Rayburn House Office Building, Hon. Peter Hoekstra [chairman of the subcommittee] presiding.

Present: Representatives Hoekstra, Norwood, Hilleary, Ballenger, Parker, Mink and Scott.

Also Present: Representative Miller of California.

Staff Present: Robert Borden, Professional Staff Member; Patrick Lyden, Staff Assistant; Mark Rodgers, Workforce Policy Coordinator; Rebecca Campoverde, Professional Staff Member; Cassie Lentchner, Minority Special Counsel; John Lee, Minority Investigator; Greg Johnson, Minority Counsel; Michael Berlin, Minority Counsel; Brian Compagnone, Minority Staff Assistant; James Jordan, Minority Press Secretary; Dan L. Anderson; Brian Connelly; Joe DiGenova; Chris Donesa; John Loesch; William Outhier; Michael Quickel; Michael Reynard; Lisa Rich; Fred Smolen; August Stofferahn; and Victoria Toensing.

Chairman Hoekstra. The subcommittee will come to order.

Good morning. The full committee Chairman, Mr. Goodling, would have been here this morning, but he's otherwise occupied at home in his district. He's asked that his written statement be made a part of the record. Without objection it is so ordered.

[The information follows:]

Chairman Hoekstra. Today I'm eager to hear from our witnesses because the focus of today's hearing, I think, is a very important issue that has philosophical, financial and practical implications; that is, who's going to pay for the rerun of the Teamsters Union election now scheduled to occur this summer?

I'll touch briefly on what has become the rather complicated history of this entire unfortunate affair by way of setting the stage for what our witnesses will be discussing in a few minutes.

In 1989, there was a consent decree between the Justice Department and the International Brotherhood of Teamsters. This consent decree came about because the Justice Department had sued the IBT in a civil racketeering case alleging felonies and organized crime connections. As part of the content decree, the government ran the 1991 election at the expense of the IBT and had the option of overseeing or supervising at taxpayer expense the 1996 Teamsters election. As we all know, the government opted to do so, and the costs incurred by the American taxpayers came to approximately $20 million.

As we also know, the 1996 election was corrupted by illegal activities inside the Marble Palace and the Carey campaign, and Carey's reelection was thrown out by a Federal election officer. Thus the need for this summer's rerun election.

Last fall, because I felt the taxpayers already had done more than enough to bail out the IBT, I introduced an amendment prohibiting the Justice Department and the Labor Department from using its 1998 appropriations to pay for further Teamster election activity. I do not feel taxpayers should foot the bill for Teamsters' illegal conduct. I'm not unmindful that by asking the IBT to pay for the reelection I'm also asking the rank-and-file Teamsters to pay. This is a Hobson's choice.

What I would like to see is a reimbursement to the IBT from the people and the organizations who caused the 1996 election to be thrown out. More importantly, I want the IBT to rid itself of the financial albatross of Federal supervision costs, such as the election officer, the Independent Review Board and the millions being spent because past union bosses did not take care of the members' dues.

Last December the election officer sought a court order to secure the funds to pay for this rerun. The IBT argued at that time that the taxpayers should pay yet one more time. Judge Edelstein in New York disagreed. He said, and I quote, "The time has come when the IBT must bear its own costs for cleansing its Augean stable. In plainer words, they made the mess. It is their job to clean it up at any price." End of quote.

Not willing to pay for cleaning up its own mess, however, the IBT appealed Judge Edelstein's decision to the Second U.S. Circuit Court of Appeals. On March 30, a divided panel of the court voted 2 to 1 to reverse Judge Edelstein. The two judges held that if the United States Government feels the need to supervise the rerun, the Teamsters need not pay for it.

I'm sure we all agree that the idea of holding this rerun and not having it supervised is completely unthinkable, given the IBT's recent history and the fact that several dozen officials loyal to Ron Carey still occupy high positions of authority at the Marble Palace. So once again the IBT bosses' intransigence, their unwillingness to meet their obligations, their disrespect for the taxpayers and their disregard for the best interests of the Teamsters' own rank-and-file members have left us in a very difficult place.

As we'll hear in more detail from our witnesses, the Justice Department does not have adequate available funds to pay for this rerun. On May 14, the Department asked the full Second Circuit appeals court to rehear the funding question. Although I hope the full court can reach a different conclusion than the 3-judge panel did, I'm concerned that the status of the law today raises the possibility of further delay and possibly even postponement of the election.

I'm also looking forward to hearing from the Justice Department this morning on another issue, authority of the independent financial auditor appointed by Justice to monitor the finances of the troubled IBT. I was disturbed, and I think many of my colleagues shared my dismay, when Mr. Marvin Levy testified to this subcommittee on April 29th that he is not a CPA; he's not an auditor; that he does not function as an auditor with regard to the IBT finances; that he does not perform any investigatory function; that he does not attempt to determine the prudent business use of any particular expenditures; and that although the agreement under which he operates appears to give him veto power over IBT expenditures, he has not come close to exercising that authority in the approximately 6 months he's been on the job. In fact, Mr. Levy acknowledged that, hypothetically speaking, he might well approve the purchase of a Lear jet by the IBT if the paperwork appeared to be in order.

I look forward to being educated by our Justice Department witnesses today about this arrangement.

And finally, I want to say a word about the tapes of the IBT's general executive board meetings that this subcommittee has subpoenaed. Why have we subpoenaed these tapes? For several reasons: Because there were discussions by board members who had and have statutory fiduciary obligations to their rank-and-file members under Federal law. In our March 26 hearing, Mr. DeRusha testified to this subcommittee that he was thrown out of a board meeting when he questioned union finances and expenditures; because there were discussions that, as we know, and as we know from sworn testimony before this subcommittee, involve manipulation of pension funds containing millions of dollars belonging to the IBT membership; because there were meetings that we know from Federal election officers touched on financial misconduct at the Marble Palace, on threats and intimidation towards international trustees of the union, and on improper and likely illegal activities on the behalf of the Carey campaign.

After many weeks of delay and resistance, lawyers for the IBT appear to have agreed in principle to produce these tapes. The IBT's lawyers agreed to production only after this subcommittee went far beyond what is required by House rules or the law and offered to appoint an independent third party to redact from the tapes discussions involving collective bargaining strategy even though Congress has the legal right to obtain these tapes in their entirety.

In spite of that extraordinary step of cooperation on our part, some Members of the Minority still question why this subcommittee needs tapes of the IBT's board meetings. The IBT's former director of government affairs, Bill Hamilton, recently was indicted. The Department of Justice charges discuss possible illegal financial dealings between the IBT and the Democratic National Committee. So it's not hard to see why some Members of the Minority would demagogue our requests as fishing expeditions, and mischaracterize those board meetings as private conversations, and try their best to keep them from the rank-and-file Teamsters and the public.

Mr. Sever, who is the secretary-treasurer of the IBT and is effectively running the organization these days, is with us this morning.

Mr. Sever, you would do a great service to this subcommittee and to the pursuit of truth if you could use your good offices to make this turnover of the tapes happen. I believe this subcommittee could do no better service to the rank-and-file members of the Teamsters than to help pull back the dark curtain of secrecy that has enveloped the Marble Palace for too long.

Also as part of the opening statement today, we would like to welcome a new Member to both the full committee and the subcommittee. Welcome, Mr. Parker; we're glad to have you here today. Thank you.

Mr. Parker. Thank you, Mr. Chairman. I'm glad to be here.

Chairman Hoekstra. Good.

Mrs. Mink.

Mrs. Mink. Thank you, Mr. Chairman. I, too, want to join in welcoming our distinguished witnesses for this hearing.

The Minority takes the view that the courts have decided the issues of the upcoming rerun election of the Teamsters. It was the Bush administration's Department of Justice and Labor that decided to forego the recall enforcement against corruption and racketeering and instead engage the Teamsters Union in a consent decree. That consent decree was signed and executed and provided for a very intense monitoring and supervision of the 1996 elections.

Following the elections it was discovered as a result of the election officer's scrutiny of the records that there was illegal money laundering occurring in the Carey campaign. Three individuals pleaded guilty as to their conduct, and following that, the elections was set aside. Subsequently Ron Carey was prohibited from running for reelection. A new election officer was appointed and continued the scrutiny of the Hoffa campaign. Irregularities were found, fines were imposed, certain individuals were barred from participating in the rerun elections for Mr. Hoffa's campaign.

But all of that, it seems to me, leads to an inevitable conclusion that we are governed by the consent decree which specifies, and which the court has now concurred in, must be run at the expense of the Federal Government. We are at a very, very difficult point because the Congress last year barred, prohibited, the Federal Government from expending any funds for this rerun.

It seems to me that the core of the issue is returning this union to the control and management of its members. How difficult, how inexplicable the circumstances are to deal with respect to the '96 elections. Our obligation is to comply with the consent decree, comply with the court order, make it possible for the Federal Government to fulfill its terms and obligations in that consent decree as ordered by the court, and proceed without delay in the elections which have been requested to occur sometime in September.

We may not like what has occurred in the past. We may find the conduct of many parties as absolutely despicable under the conditions of what the government and the expectation of the Teamsters were at the time of the election. What our obligation now is is to the future, to make sure that the election under a new election officer in which both of us have expressed a degree of confidence allow him to run this election as best he can.

There is no law on earth that is going to make every system under which a law operates perfect, so we have to be apprehensive, but it seems to me we ought to narrow for today's hearing the discussion and deliberations exclusively on the rerun election, who is to pay for it, and if the Federal Government still, out of the prohibitions enunciated by the Congress, is hampered from proceeding, then it is the Congress that must bear the responsibility of not allowing this union after almost 2 years to have duly elected officers, to restore the control and management of this union to its members and to a newly elected set of officers.

That is our view of the circumstances today, and we hope that the witnesses can provide us with thoughts and observations and recommendations upon which this committee can proceed and make recommendations to the full Congress.

Thank you very much, Mr. Chairman.

Chairman Hoekstra. Thank you.

Chairman Hoekstra. Without objection the opening statement of any other member of the subcommittee who wishes to provide one will be included in the record.

Mr. Scott. Mr. Chairman?

Chairman Hoekstra. Mr. Scott.

Mr. Scott. Point of personal privilege?

Chairman Hoekstra. State your point.

Mr. Scott. Mr. Chairman, you made reference to some Members of the Minority who have questions about the tape and made somewhat disparaging remarks about those who have problems, and I would like to be able to respond very briefly to that.

Chairman Hoekstra. State your comments.

Mr. Scott. Mr. Chairman, my comment, my problem, is not keeping the tapes from the rank and file. My problem is keeping the tapes from--all of the tapes from the Republican Party. The subpoena was not specific. You just asked for all of the tapes, not a specific conversation in which we have reason to believe some business was discussed, but all of the information.

As a matter of fact, and if you look at the subpoena itself where you have asked for all books and records and receipts for 5 years, we have asked for any conversations between the IBT and the AFL-CIO and other groups; we have asked for conversations, all documents referring to or containing any information between the Teamsters and the White House, all documents referring to or containing information about the retention of various law firms.

This is a very widespread, nonspecific information gathering that may or may not contain any useful information, but I think, and I may be the only one, I don't know, but I know I have expressed this to you, that in that context I just think asking for the tapes even with the scheme we are trying to figure out where we can keep most of it, at least some of the irrelevant stuff, secret is just overly broad.

Chairman Hoekstra. Thank you, Mr. Scott.

We have bent over backwards to work out with the Minority, with the IBT how to get those tapes. I just go back to my colleague from Michigan who after, I believe, illegally using taping documents was quoted as saying, House of Representatives, unquote, is the grand jury to the Nation. I believe that the correction that we are doing is not nearly the extent that my colleague from Michigan in the past has used the investigative responsibilities and duties of the committee, and it is well within our bounds.

Let's move on to our witnesses today.

We have four witnesses with us today to offer testimony on the important question of who should pay to rerun the failed 1996 Teamsters election. Two witnesses from the General Accounting Office will discuss issues related to potential Federal funding of these elections. Gary Kepplinger is the Associate General Counsel of GAO, and Thomas Armstrong is the Assistant General Counsel. Good morning and welcome.

From the Justice Department we will hear from Stephen Colgate, the Assistant Attorney General for Administration; and from the International Brotherhood of Teamsters we will receive testimony from Thomas Sever, who is the acting president of the union.

Good morning to all four of you. I'll ask you to summarize your testimony this morning in a brief statement, and without objection, your full testimony will be included in the hearing record. And before receiving the testimony of the witnesses, the Chair will ask them to take an oath. The witnesses should also be aware that making a false statement to Congress while under oath may be prosecuted under law. In light of this, will the witnesses please rise and raise your right hand?

[Witnesses sworn.]

Chairman Hoekstra. Let the record reflect that each of the witnesses have answered in the affirmative, and you may be seated. Thank you.

Chairman Hoekstra. Mr. Kepplinger, you are recognized for your opening statement.

TESTIMONY OF GARY L. KEPPLINGER, ASSOCIATE GENERAL COUNSEL FOR ACCOUNTING AND FINANCIAL MANAGEMENT, GENERAL ACCOUNTING OFFICE; ACCOMPANIED BY THOMAS H. ARMSTRONG, ASSISTANT GENERAL COUNSEL, GENERAL ACCOUNTING OFFICE

Mr. Kepplinger. Thank you, Mr. Chairman, Mrs. Mink and members of the subcommittee. I'm pleased to be here today to discuss the Comptroller General's April 28, 1998, opinion concerning the availability of appropriated funds to pay the cost of supervising a rerun of the 1996 International Brotherhood of Teamster's election. With your permission I have a brief statement which I'll read and a copy of our April 28th opinion that I'd like to introduce into the record.

Chairman Hoekstra. Without objection it will be submitted for the record. Thank you.

Mr. Kepplinger. A lot of the background that's in my statement has already been covered, so I'll proceed essentially to the issues that we addressed.

In response to your questions, Mr. Chairman, concerning the availability of funds to pay for the election officer's supervision of the 1996 election rerun, we examined the 1997 Justice Appropriations Act, the '98 Justice and Labor Appropriations Act, and the so-called Judgment Fund, the permanent indefinite appropriation used to pay most litigative and many administrative awards against the United States. As you know, Congress in the '97 Justice Appropriation Act provided the Department with 1.9 million for supervision of the union's national election. Since Congress provided that, those funds remain available until expended, and since both the district court and the court of appeals view the election rerun as a continuation of the '96 election, we believe Justice may use the unobligated balance of the 1.9 million to pay the costs of supervising an election rerun.

The transfer and reprogramming provisions contained in the '97 Justice Appropriations Act do not authorize Justice to transfer or reprogram funds in fiscal year '98 to cover the expenses of the '96 election rerun. An appropriation act is by its very nature nonpermanent legislation. Accordingly, its provisions expire at the end of the covered fiscal year except for those provisions that Congress enacts as permanent provisions of law. We found nothing in the language or nature of the '97 Appropriations Act's reprogramming and transfer provisions to indicate that they survived the close of fiscal year '97.

With respect to the '98 Justice and Labor Appropriation Acts, Congress included specific restrictions on the use of funds made available in those acts to pay the election officer's expenses of supervising the election rerun in fiscal year '98. Thus, funds made available in those acts are not available to cover these expenses.

We also found that because of the restrictions contained in the '98 Labor and Justice Appropriations Acts, Justice and Labor could not use any funds transferred or reprogrammed from other funds made available in those acts to pay the election officer's expenses of supervising the election rerun. Nor may Justice or Labor transfer funds from previously appropriated multi- or no-year funds to pay the election officer's expenses.

The language of the transfer authority provided in the '98 Justice and Labor Appropriation Acts only authorizes transfers of funds made available in those acts for the current fiscal year, not the transfer of funds appropriated in different fiscal years.

Finally, with respect to the Judgment Fund, the appeals court's reversal of the district court's order does not satisfy the statutory criteria governing payment from the Judgment Fund. The appeals court did not make a final specific monetary award against the United States, a prerequisite to payment from the Judgment Fund. Rather, the court simply explained its interpretation of the consent decree. If the government chooses to supervise the rerun, it will have to pay for that supervision.

Any court order can be translated into a specific monetary amount in the sense that the costs of compliance with the order can be calculated and quantified. That does not mean, however, that those costs are payable from the Judgment Fund. As the Supreme Court has noted, the Judgment Fund is not, quote, an all-purpose fund for judicial disbursement. Rather, funds may be paid out only on the basis of a judgment based on a substantive right to compensation.

We view the costs of supervising a rerun of the '96 election as programmatic costs that, but for the specific restrictions in the '98 Labor and Justice Appropriation Acts, Justice and Labor could pay from available operating accounts. In our opinion, the fact that Congress has chosen to bar the use of funds made available in those acts should not be viewed as an invitation to convert the Judgment Fund from an appropriation to pay damage awards to a program account to circumvent congressional restrictions on the appropriations that would otherwise be available to cover these expenses.

Mr. Chairman, this concludes my prepared statement, and I'd be happy to answer any questions the subcommittee may have.

Chairman Hoekstra. Thank you.

Chairman Hoekstra. Mr. Colgate?

Mr. Colgate. Good morning. My name is Steve Colgate, and I'm the Assistant Attorney General for Administration with the United States Department of Justice. The Department appreciates the committee's interest in the question of funding for supervision of the rerun of the 1996 International Brotherhood of Teamsters election. I have submitted my full statement for the record. This morning I'll focus my remarks on the Department's proposal for funding the supervision of the rerun of the election.

As the subcommittee knows, the government believes that it has made great progress in reforming the IBT, but that the continued efforts are crucial to ensuring the reform of the Nation's largest trade union. The United States Attorney for the Southern District of New York, Mary Jo White, has today also sent a letter to the subcommittee reiterating her position that supervision of the rerun is a law enforcement priority and urging the subcommittee to do everything in its power to ensure that the supervision occurs.

I want to preface my remarks about funding by explaining that the government has sought to have the IBT pay for all the costs of the rerun election. We took this position in the District court In the Southern District of New York, and the district court agreed with us and ordered the IBT to pay for the rerun. Unfortunately the second circuit court of appeals reversed this decision. Last Thursday the government asked the Second Circuit in the 2-1 split decision to reconsider the reversal en banc. I have brought a copy of the government's petition to the Second Circuit for any members of the subcommittee or staff who are interested in reviewing it.

I'll now turn to the immediate question of funding which is necessary for the rerun to move forward today. I understand from our lawyers that it will_that if we ultimately prevail with our position in court, the United States will be reimbursed for rerun expenditures incurred during this period.

I want to focus on Chairman Hoekstra's letter dated May 7, 1998, to the United States Attorney Mary Jo White requesting the Department to develop an interim funding plan for the rerun, and I'm pleased to present that plan to the subcommittee today. The Department's efforts to find available sources of funding for the supervision are constrained by the 1998 Appropriations Acts for the Department of Justice and Labor which prohibit the use of funds made available in those acts for supervision of the IBT election. Therefore we have made an effort to identify other potential sources of funding.

Our plan consists of using money from five sources, two of which the Department would only use after congressional notification. First, an available source of funding for the rerun is, of course, the restitution money provided to the election officer and held in an escrow account. Of the 1.42 million originally placed in this account for the purposes of funding the rerun, some moneys have already been spent on the ongoing supervision costs. Together with other small remedial fines imposed by the election officer, a total of 832,000 is available from this source to fund the rerun of the election.

Second, in the fall of 1997, when the Department and IBT were discussing a sharing of costs of the rerun, the IBT agreed to advance to the election officer $200,000 to help cover expenses. The election officer has advised the Department that 57,700 of this amount remains available.

Third, the Department agrees with the Acting Comptroller General that whatever amounts remain from the $1.9 million appropriated to the Department of Justice in the 1997 Appropriations Act for election supervision would not be barred by the prohibition in the 1998 Appropriations Act. Most of this money has been or will be used do pay additional non-rerun expenses of the 1996 election, including expenses associated with the investigation of Mr. Carey and Mr. Hoffa. Such expenditures are consistent with last year's request of the appropriations subcommittees having jurisdiction over the Department of Justice that the 1997 money be spent on non-rerun costs. Although the Department has not yet received all the bills for these expenses, we anticipate that there will be only approximately $224,000 of these funds remaining to pay for the costs associated with the rerun. It is our intention to spend these funds only after consultation with the Congress.

Fourth, the Department has also identified another potential source of funding that was not considered by the GAO in its advisory opinion to the subcommittee. The Department believes that funds contained in the Asset Forfeiture Fund Super Surplus Account as of September 30, 1996, are available to pay for supervision. The total amount of these funds is approximately $3,017,000. By law these funds are available to the Attorney General, without fiscal year limitation, for any Federal law enforcement litigative, prosecutive and correctional activities or any other authorized purpose of the Department of Justice. The Attorney General has determined that the use of these funds for the supervision of the rerun would be appropriate.

The Department is required to notify Congress of its proposed use of these funds. Let me be frank. We may experience the same type of congressional objections to our use of this money as we did in the fall of 1997 to our use of the 1997 funds appropriated for IBT election supervision. As a matter of long-standing practice, the Department has not in the past used funds in the face of clear congressional opposition to a reprogramming notification.

If all of these four sources were used, there would be approximately $4.1 million for purposes of funding the rerun.

Finally, the U.S. Attorney's Office again has been in discussions with IBT about sharing some of the costs of the rerun. They are hopeful that if Congress agrees that the Department should use the available sources of funding I have just described, then the IBT will agree to pay a portion of these costs. Whether the IBT will agree to pay and to what extent remain open to discussion and negotiation.

There is one other possibility. As a result of our FY 1997 audited financial statement, the Department is in the process of reviewing its obligations for that fiscal year. If we are able to identify any overstated obligations which may be available for this purpose in multiyear accounts, we'll advise the subcommittee, as this could be another potential funding source.

In the event the Department is not able to secure enough funding through these sources, we would urge the Congress to lift the restrictions on the use of the fiscal year 1998 funds for purposes of the election supervision or to separately appropriate moneys for this purpose.

I thank the subcommittee for the opportunity to testify on this important matter, and I'd be glad to answer any questions that you may have.

Chairman Hoekstra. Thank you Mr. Colgate, and thank you for indicating a willingness to work with the Congress before the Justice Department moves ahead. We appreciate that consideration.

Chairman Hoekstra. Mr. Sever.

TESTIMONY OF TOM SEVER, SECRETARY-TREASURER, INTERNATIONAL BROTHERHOOD OF TEAMSTERS

Mr. Sever. Thank you, Mr. Chairman, and thank you and members of your committee for allowing me to be here today, and with that I will give my statement.

My name is Tom Sever. I am the general secretary-treasurer of the International Brotherhood of Teamsters, and I'm also the acting general president. I thank the subcommittee for inviting me to appear. I am appearing voluntarily in response to that invitation.

I understand the main purpose here today is to explore election officer supervision of the rerun of the 1996 International Brotherhood of Teamsters elections. If the question is whether election officer supervision is a good thing, my answer is yes. The IBT and I support election officer supervision.

Of course, union elections usually are not supervised. Supervision by outsiders is not a part of the union's ordinary operation, but we all recognize that supervision is a useful safeguard. It will increase everyone's confidence in the results of the rerun election.

I understand the subcommittee wants to explore who will pay for the supervising of the rerun election. In the 1989 IBT consent decree, the United States Government promised to pay to supervise the 1996 elections. Supervision was not required. The agreement was that the Federal Government could choose supervision, but would have to pay for it. This was part of the bargain struck in the consent decree. That bargain required Teamsters to pay the costs of supervision of the 1991 elections and the cost of the Independent Review Board. The costs have amounted to $10 million, and they are growing.

As part of the bargain, the Federal Government was required to pay for supervision of the 1996 elections. In late 1997, however, Congress passed bills intended to prevent the United States Government from spending any money at all on rerun supervision. Because of the bills passed by Congress, the election officer was left without any source of funding.

As we all know, the Federal court of appeals held that the United States Government is obligated to comply with the promises it made in the consent decree. The Federal court said, and I quote, "We reject the government's argument that the IBT is directly responsible for causing the rerun. The IBT status as a victim of embezzlement is simply not a violation of the consent decree. The government must bear the costs it has agreed to", end of quote.

With these statements, the Federal court has made the government's obligation clear. The court's decision does what the proposed 1997 compromise would have done, eliminate and certainly permit us all to get on with the election.

In evaluating what the court said, everyone must recognize that the Teamsters have shouldered a big financial burden with respect to the Teamsters elections, including election officer supervision. In 1991, the Teamsters paid about 21 million for election officer supervision. In 1996, the Teamsters paid 7 million for election costs, including supervision. The supervision costs included expensive printing costs for election officer's pages in the Teamsters magazine. It also included costs of renting offices for the election officer and her staff. We are still paying for those offices.

With respect to the rerun, the Teamsters will pay almost 2 million for offices and magazine printing for the election officer. Therefore it is wrong for anyone to suggest that the Teamsters will not pay a lot of money for election officer supervision.

I have been asked whether the Teamsters would agree to a proposal made in 1997 to split costs. In light of that decision of the Federal court, things are different, and everyone has to recognize that Teamsters are paying millions of dollars annually for oversight. Does this mean the Teamsters will pay nothing with respect to the supervision of the rerun? Obviously not. We have already agreed to pay the election officer's rent and to publish election officer magazine pages, and we are willing to work with all concerned, including Congress, to accomplish the important goal of a speedy election.

I know that some Members of Congress do not always agree with our legislative goals or our positions in collective bargaining, but our job is to serve the workers. We have strengthened union democracy. We have promoted reform. We mounted the first successful organizing campaigns at companies like Overnight Transportation. We fought for the future of all working people in contract campaigns like the one last year, United Parcel Service, and this year in the National Master Freight Agreement, and we have become an effective political voice for working families. The International Brotherhood of Teamsters is proud of its record.

With that, Mr. Chairman, I will be happy to receive you and other committee members' questions. Thank you.

Chairman Hoekstra. Thank you very much for being here.

Chairman Hoekstra. You know, we're looking at somewhere along the line different groups are going to be responsible for paying somewhere in the neighborhood of 7 to $10 million for the rerun election, and to understand whether that money is going to be effectively spent, I've got some questions on what happened in 1996, Mr. Sever, for you.

The checks that were written in October and November of 1996 to political groups such as Project Vote, Citizen Action or the National Council of Senior Citizens, were there any restrictions on those checks? In other words, did you or Mr. Carey have to get approval of the general executive board prior to cutting a check for 10-, 50- or $100,000?

Mr. Sever. No, we didn't, Mr. Hoekstra.

Chairman Hoekstra. Okay.

Mr. Sever. We were not required to under the Constitution, and we were so advised by legal attorneys.

Chairman Hoekstra. Okay.

Your signature and Mr. Carey's signature were on the $150,000 check from the IBT to the AFL-CIO dated on November 1 of 1996. Did you know about this check before it was issued?

Mr. Sever. Not really. I became aware of it at a later time.

Chairman Hoekstra. Okay.

How did the signatures get on the checks without your knowledge?

Mr. Sever. Well, both the general president's office and my office have people that are designated to endorse, you know, such expenditures, and once it is endorsed by the general president's office, it will come to my office. And my office, we have accounting_ director of accounting Joe Selsavage and my executive assistant, Jim Bosley, who can endorse these checks, and that's how--that's the procedure, Mr. Chairman.

Chairman Hoekstra. Why did the IBT then have a process of requiring two signatures if perhaps a second one was primarily, would it be fair to characterize it as an automatic, almost automatic signature if it came from the president's office? Is that correct?

Mr. Sever. Well, it would once the president's office signed it, it became pretty apparent that it was a good request and my office would certainly review that and supporting documents and endorse it likewise.

Chairman Hoekstra. Okay.

The $150,000 check to the AFL-CIO was drawn on the general treasury fund. Are you aware of that or were you aware of that?

Mr. Sever. Would you repeat that, Mr. Chairman?

Chairman Hoekstra. The $150,000 check to the AFL-CIO was drawn on the general treasury fund. Were you aware of that?

Mr. Sever. Yes.

Chairman Hoekstra. Okay.

Your signature and Mr. Carey's signature were on an $85,000 check from the IBT to the National Council of Senior Citizens, and that was dated October 24 of 1996. Were you consulted about that check before it went out over your and Mr. Carey's signatures?

Mr. Sever. No, I wasn't, Mr. Chairman. Our signatures would appear on every check. There would be other documents, internal documents, that would be authorized before that check was drawn. So our checks would normally appear on every expenditure that left the International Brotherhood of Teamsters.

Chairman Hoekstra. Okay.

Are you saying there were other documents that would have authorized the writing of that check previously?

Mr. Sever. Or request.

Chairman Hoekstra. Okay.

The--that check to the National Council, was that drawn--National Council of Senior Citizens, was that drawn on the general treasury fund as well?

Mr. Sever. I believe it was, Mr. Chairman.

Chairman Hoekstra. Okay.

Your signature and Mr. Carey's signature are on two checks to Project Vote, one for $100,000, dated on October 24; one for $75,000, dated on October 31. Were you consulted about those checks before they went out?

Mr. Sever. No, I wasn't.

Chairman Hoekstra. Were those also drawn on the general treasury fund?

Mr. Sever. Yes, they were.

Chairman Hoekstra. The $475,000 check from the IBT, the Citizen Action, in October of 1996, again, your signature was on it. When you get to $475,000, were you consulted before that check was issued?

Mr. Sever. Yes, I was.

Chairman Hoekstra. That was drawn on the general treasury?

Mr. Sever. Yes, it was.

Chairman Hoekstra. Are you aware that the election officer Kenneth Conboy found that all these contributions I've asked about were used in an illegal swap that resulted in $885,000 in IBT funds leaving the IBT treasury?

Mr. Sever. I'm not aware that all of these expenditures were used for illegal improprieties as you've indicated.

Chairman Hoekstra. Are you aware that this $885,000 of rank-and-file funds were given away to provide contributions to the Carey campaign in perhaps an amount of roughly $327,000?

Mr. Sever. I am aware of misappropriation, but, Mr. Chairman, all these misappropriations are under investigation. I have cooperated completely with all the investigative branches, and I will continue to do so, and I will take the appropriate action whenever those investigations are concluded and everybody gets their day in court.

Chairman Hoekstra. The net worth of the Teamsters, of the IBT, between 1995 and 1996 decreased by approximately 14 million from a net worth of roughly 30 million at the end of 1995 to approximately 16 million at the end of 1996. Are you aware of that?

Mr. Sever. Yes, I am.

Chairman Hoekstra. Do the checks which we discussed, roughly $885,000, contribute to that decrease in net worth?

Mr. Sever. That would be an expenditure that would, yes.

Chairman Hoekstra. Okay.

And the fact that the election officer found that these checks totaling $885,000 were authorized at a time when the IBT was suffering a negative cash flow and that's a quote, and the quote continues and in a period when the net assets of the IBT had been depleted by half, despite--,those funds were transferred, quote continues, that despite the statement in Mr. Hamilton's October 23, 1997, Project Vote memorandum that we've hit the treasury pretty hard by these contributions, and despite Carey's own knowledge that the dry fund was so badly depleted that it required a $500,000 loan. The question is as we take a look at a rerun election, what steps now have you put in place as the acting president to assure the rank and file that their funds are being protected and, for those who are going to pay for this election, that we're not going to have this same kind of money laundering the next time through?

Mr. Sever. Mr. Chairman, I have reduced the amount of people that can endorse or make requests for expenditures both on the general president's floor and most certainly in my floor. We have eternal union auditors that come under the consent decree, that two of them were fraud auditors, and they're under Attorney Levy's authority. We have since they have been there, we haven't--there is not one question raised about any expenditure that is not proper and without justification. We have outside attorneys reviewing some of our expenses and expenditures, and I can assure you that I will continue at the best interest of the International and the membership that we serve will continue to make certain that a mistake has not been made again.

Chairman Hoekstra. Are these all now written new rules, formalized new accounting rules or expenditure rules?

Mr. Sever. These are rules that I've advised the general president's office staff and my office staff and, most importantly, my director of accounting Joseph Selsavage.

Chairman Hoekstra. Is it safe to assume that in 1998 these kinds of expenditures, that you will review them personally before they are executed?

Mr. Sever. It's safe to say that I will review every one of them personally.

Chairman Hoekstra. Thank you.

Mrs. Mink.

Mrs. Mink. Thank you, Mr. Chairman.

I would like to get back to the statement you presented, Mr. Colgate, on the available funding, because I believe that that's the issue that this committee is addressing this morning, and not all the other ramifications of why the elections are set aside and why we have to have a rerun election. The question before this committee is how will we have a rerun election if we don't have the authority to pay for it. You've come up with a partial payment plan, and I wanted to find out in each instance--in the case of the escrow fund of $832,000, is that taxpayers' money, or where is that money from?

Mr. Colgate. I understand that escrow funds are essentially Teamsters money that has been set aside in an escrow account.

Mrs. Mink. Well, if we do not have the rerun election, are you planning to return that $832,000 to the Teamsters? That's my understanding what a definition of an "escrow" is.

Mr. Colgate. Before we make a decision on that, I would want to consult with the U.S. Attorney's Office in the Southern District of New York.

Mrs. Mink. Well, there is a possibility that you would be required--

Mr. Colgate. It seems like a very logical conclusion. I just want to make sure there may be not be other outstanding--

Mrs. Mink. I don't mean to--my question was not a trick question.

Number two, remaining in advance. That's clearly IBT money also.

Mr. Colgate. That was an advance.

Mrs. Mink. It is an advance for what? For rerun elections? So if you have no rerun election, that money would be returned also?

Mr. Colgate. Essentially it's my understanding it was an advance to support during this interim phase the election officer. So my best understanding is if it were not used, it would be returned.

Mrs. Mink. What is in your mind, or at least in the Justice Department's policy decision-maker's mind, the absolute cut-off date when this decision by Congress must be made, or the projected elections in September will have to be called off?

Mr. Colgate. Well, we're assessing that right now, but we are faced with a very imminent issue here. I mean, the election officer has put forward a schedule that runs essentially, from my understanding, from the middle of June through October, and our preliminary review is that that's a reasonable timetable. So if these deliberations on how we're going to finance aren't concluded in an expeditious manner, it will put us in a difficult position on meeting this time schedule that we believe the election officers set forward as a reasonable one.

Mrs. Mink. The House goes into recess this Friday, and we're not due back until the 3rd of June. If no decision is made by the 3rd of June, will the election now have to be postponed?

Mr. Colgate. I can't say with absolute specificity on the 3rd of June, but when you start getting down to that date, it starts to put us in a very difficult position.

Mrs. Mink. The third item on your list remaining in the '97 Justice funds, whose moneys are those?

Mr. Colgate. Those are appropriated resources appropriated to the U.S. attorneys in fiscal year 1997. There is an appropriation of 1.9 million. There is $224,000 approximately available.

Mrs. Mink. I see. And the fourth item which you have suggested, asset forfeiture, that comes from convicted offenders whose assets were seized, and drug raids, and so forth; is that the account you're talking about?

Mr. Colgate. That's correct. It's essentially illegal proceeds basically related in the drug area that are essentially forfeited to the U.S. Government and then deposited in that forfeiture fund.

Mrs. Mink. So in that list of four items, the only one that can be directed as taxpayer dollars are the $224,000; is that correct?

Mr. Colgate. That's correct when you look at the basic route of where asset forfeiture funds come from.

Mrs. Mink. So would it be a logical conclusion to say that even though the Congress has banned the use of appropriated funds, that everything except the $224,000 listed could be used for the rerun election

Mr. Colgate. Well, I would say

Mrs. Mink. Since the first two are Teamsters' money and the last is not taxpayers' money? I want to ask the GAO the same question because it seems to me that we have at hand the potential of 300 and--no, $3,800,000.

Mr. Colgate. My personal view is that the forfeiture fund, you know, would be available, and essentially it's not receipts that we receive based on the collection of taxes. These are receipts that we receive from the forfeiture of ill-gotten gains. So that $3 million are Federal funds and would, if the Attorney General so decides, would be available. So I would, although it doesn't come out of miscellaneous general receipts like the $1.9 million, they are receipts to the Federal Government, and they are Federal funds at this point.

Mrs. Mink. Now in previous hearings we were led to believe that the funds that were set aside for the 1996 election were not totally expended, and some $2 million were left over. Why are those not listed in your column?

Mr. Colgate. I believe that it refers to the $1.9 million which was appropriated, and there's 224- left against that '97 appropriation.

Mrs. Mink. So the 1.7 million was utilized between the election until the present time; is that correct?

Mr. Colgate. To pay for the ongoing activities that were approved in consultation with our Appropriations Committee as being appropriate.

Mrs. Mink. Is it accurate to say that those funds can continue to be utilized in this rerun election without action by the Congress?

Mr. Colgate. It's our view that we would have to notify the Congress that we would be using them for these purposes. There is a general provision in our appropriation act that requires prior to obligation a notification of the committee and that we did run into some difficulty on what type of expenses they could be used for last fiscal year.

Mrs. Mink. In the court's enunciation of the clear obligation of the Federal Government to pay for the rerun, how is it possible that you could utilize Teamsters' money to satisfy that decision, because clearly the first two items are Teamsters' money?

Mr. Colgate. I would really want to defer to legal counsel on that point. I would, however, point out that we are appealing that decision.

Mrs. Mink. Well, but on the assumption that you will fail, then clearly those two items in your column there are Teamsters' money, and that, as I see it, would not be appropriately available for a rerun, unless the Congress lifted the ban entirely.

Mr. Colgate. Our preliminary review, though, at this point, and that is in consultation with the U.S. Attorney's Office in New York, as well as our Office of Legal Counsel, our preliminary review is that those two sources would be available to use. But ultimately we would have to take a look at the Court ruling and we would also, I am sure, have to be subject to negotiation with the Teamsters as well. I think it is both points: what the court rules and negotiations with the Teamsters.

Mrs. Mink. In any of the responses by the Justice Department, do you find any disagreements, I should say, Mr. Kepplinger?

Mr. Kepplinger. Mrs. Mink, we are in agreement with respect to the remaining balance of the 1.9 million in year funds that was appropriated in 1997. With respect to the--I can't remember what the reference was, a Superfund out of the asset forfeiture fund, as part of our work for the committee, we did not specifically look at that and became aware of that only as a potential source of funding yesterday afternoon. My experience with the asset forfeiture fund is that while it does receive the recoveries by the law enforcement officers of the government, that they are nonetheless, and we view them as, appropriated funds. Accordingly, there needs to be some authority to use those appropriated funds for these particular purposes.

I would be happy to examine for the committee in more detail whether they are available. I would point out, however, as Mr. Colgate did, that they are subject to a reprogramming notification just like the other funds that justice has had in the past.

Mrs. Mink. Well, then the ultimate question is: The notice for reprogramming is sent to the Congress and the Congress makes no objection; does that constitute permission to use the funds?

Mr. Kepplinger. Well, presumably if they are available for this particular purpose. Now, I am not familiar with how the asset forfeiture fund works. I do know that I believe it was in the 1998 Justice Appropriation Act that Congress amended the asset forfeiture fund to make the unobligated balances available in fiscal year 1997 and thereafter. In other words, meaning its permanent authority to Justice to use those for whatever purposes. But I would point out that that was done in the 1998 Appropriations Act, which means that they were made available in that appropriations act, which is the operative term for the prohibition on the use of funds. So if they have any unobligated balances in the asset forfeiture fund, they need to be prior to 1997.

Mr. Colgate. If I could respond.

Mrs. Mink. Yes.

Mr. Colgate. I would like to make one correction and respond on the asset forfeiture. Counsel has informed me that the district court has ordered that the monies in the escrow account be spent on the rerun, so we would view it as being available. On the asset forfeiture fund, there is $3,017,000 in the super surplus fund. Three million dollars of that is money identified for fiscal year 1993, and 16,000, almost 17,000, is fiscal year 1996 monies.

So it is our view, given when those funds were available, that it would fall outside of this prohibition and therefore, using the notification procedures, would be an eligible expense.

Mrs. Mink. Thank you, Mr. Chairman.

Chairman Hoekstra. The Chair has been generous with giving himself and the Ranking Member questioning time.

Mrs. Mink. I noted that. Thank you very much.

Chairman Hoekstra. Now to restore some semblance of order to our proceedings, we will try to stay a little closer to the green, yellow, red lights up there.

Mr. Norwood.

Mr. Norwood. Thank you, Mr. Chairman. I noted that also. I would also like to thank you gentlemen very much for being here as we are trying our best to do our constitutional duty and find out exactly what has happened.

Just to correct the record or clarify the record, Mr. Chairman, the escrow account that kept coming up in the previous conversation is really combined of fines paid by those who pled guilty to the various felonies; Martin Davies, 500,000; November Group, 500,000; Ann Saul, 395,000; and Nash, 25,000. So as you read the record, that is where those funds do actually come from.

Mr. Chairman, I want to start by disagreeing with Mrs. Mink, pretty thoroughly, that the courts have decided anything. We have a tie ball game. Judge Edelstein said the unions would pay. On appeal, two out of three judges said no, the taxpayers should pay. The Department of Justice has now appealed that decision and I would say that the courts have not decided anything.

Now, regarding the 1996 election, the consent decree states, and I quote: "The union defendants consent to the election officer, at government expense, to supervise," and I hope the recorder will highlight that word and underline it, "the 1996 IBT elections." That is exactly what the consent decree said.

Now, the term "supervise" has been construed broadly, at least, by the courts, initially at the government's request to include all expenses associated with the election. I think there is the source of the problem right there.

And, Mr. Colgate, I would like for you to tell me who in the government or the Department of Justice broadened the term "supervise" to ask the taxpayers to pay for a private union election when the consent decree clearly says "supervise"? Who made that decision?

Mr. Colgate. I can't answer that question on who specifically, but it is my understanding that this notion of supervision is defined as very broad, and it actually includes the actual election operations as well as the supervision.

Mr. Norwood. Can you tell me who to ask who might have made that decision?

Mr. Colgate. I am sure we could provide an answer to the committee by the end of the day.

Mr. Norwood. That is an amazing assumption about the word "supervision," is my particular feeling. I mean we definitely agreed to pay for supervising in 1996, 10 million bucks; that is a whole another hearing, I hope. And the costs, though, that were attributable to the conducting of the election costs, the ballots, mailings and so forth, the taxpayers don't understand why they are paying for an election that is of a private union that they may have absolutely nothing to do with.

Now, I think if the three of us could go over there in the corner and sit down, we could strike a trade. What we want is our 10 million back, because we didn't agree to pay for conducting an election and mailing out ballots and so forth. And if you would agree to get us our 10 million back, I think we probably could agree at that point to pay for the supervision of the rerun election. I presume "rerun election" means "special election"; Mr. Colgate, is that what that word means?

Mr. Colgate. I think that is a fair way of describing it.

Mr. Norwood. Mr. Sever, you mentioned in your comments that you had internal union auditors working to try to keep this from happening again. When you say internal union auditors, does that, in your mind, include Marvin Levy, the interim financial auditor?

Mr. Sever. He is the attorney overseeing these two fraud auditors that the government brought in under an interim understanding to review the expenditures of the international.

Mr. Norwood. So when you say we have internal union auditors, you do mean, then, Mr. Levy?

Mr. Sever. We do have those, but we also have three international union officers who are elected to do audits

also.

Mr. Norwood. You were elected the general secretary of treasury in 1991?

Mr. Sever. Yes, I was, Congressman.

Mr. Norwood. And you ran for office on Mr. Carey's ticket.

Mr. Sever. Yes, I did.

Mr. Norwood. And in 1996, you ran for reelection on Mr. Carey's slate?

Mr. Sever. Yes, I did.

Mr. Norwood. How much, if you don't mind me asking, how much did you make last year as general secretary-treasurer of the IBT?

Mr. Sever. The constitution provides that I receive $200,000 annually. Since I have been at the international, that includes a cost of living which I waived from when I was elected. I never accepted that cost of living and I haven't to this day.

Mr. Norwood. You have before you in your documents, I believe, the memo from Jere Nash, dated January 27, 1997.

Mr. Sever. What exhibit?

Mr. Norwood. Unfortunately, I don't think they are numbered by exhibits. It is 4; I beg your pardon.

Mr. Sever. Thank you kindly. Yes, I do.

Mr. Norwood. Do you have that document?

Mr. Sever. Yes.

Mr. Norwood. Would you please set it where we can get to it, and we will pick up there when my time rings in again?

Mr. Sever. Absolutely.

Mr. Norwood. Thank you, sir.

Chairman Hoekstra. Mr. Scott.

Mr. Scott. Thank you, Mr. Chairman.

Mr. Colgate, you were just asked a question about a definition of a rerun, and you called it a special election. Isn't it really the same election, isn't it the point you got beat on in court?

Mr. Colgate. Precisely. I was looking at it. This is essentially trying to complete the 1996 election process.

Mr. Scott. That's what the circuit court ruled?

Mr. Colgate. That is correct, I appreciate you clarifying that for me. You are absolutely correct.

Mr. Scott. This super surplus account, do I understand you to say that all of the drug asset forfeitures over the last 6 or 7 years only amounted to about $3 million?

Mr. Colgate. Essentially this would be a super surplus that we would declare after making allowances for the expense and operation of the fund. Essentially we provide equitable sharing to State and locals or we provide for law enforcement equipment and these types of services.

When we close our books at the end of the year, and I am giving a very general statement, if the receipts are in excess of what our expenses are, as well as the additional start-up money we need in the next fiscal year, we can declare what is called to be a super surplus.

Mr. Scott. Okay. I thought that was a somewhat modest amount over those many years.

Was the United States a party to the consent decree in the early 1990s?

Mr. Colgate. That is my understanding, yes.

Mr. Scott. And did they agree to all of the provisions in the consent decree?

Mr. Colgate. Essentially it was developed in consultation with the union; that is correct.

Mr. Scott. The title of this hearing, and we have gotten a little bit off and I may get a little off too, but it says who pays for the rerun election. Is there any confusion in the consent decree that the United States agreed to as to who would pay for this election if you wanted to supervise it?

Mr. Colgate. I think, in general terms, who would pay in the normal process is clear. But we had the situation where there were certain actions taken by senior officials in the Teamsters, and we are forced to essentially now try to complete this process, and because of those actions we are looking for the Teamsters to pay those additional expenses.

Mr. Scott. And the circuit court said that, no, you had agreed to pay for the election, this is for part of the election. And you have lost that argument in court?

Mr. Colgate. To this point, we have.

Mr. Scott. Okay. Now, if you were to supervise it, apparently there are barriers to coming up with the money. Do I understood that the only barrier to the United States fulfilling its obligations to supervise the election and pay for it is the restriction on the appropriations?

Mr. Colgate. If we could remove that general provision, that prohibition, we could develop such a plan.

Mr. Scott. Now, you don't have to continue supervising the election; is that right?

Mr. Colgate. That is correct; but we believe there are very important law enforcement purposes to be served.

Mr. Scott. But if you supervise it, you have to pay for it?

Mr. Colgate. That is correct.

Mr. Scott. So we are now in a situation where you either have to rescind the legislation, find somebody else to pay for it, or have the rerun without supervision.

Mr. Colgate. Or prevail in reconsideration before the courts and ask the Teamsters to pay for it all. That is still an option that we are pursuing.

Mr. Scott. You indicated if you front some expenses and you eventually win in circuit court, that you would expect to get reimbursed from the IBT?

Mr. Colgate. We have the mechanism, in our view, to seek reimbursement from the IBT.

Mr. Scott. If the IBT continues to win in court, would they get reimbursed for some of the money they have put in escrow?

Mr. Colgate. It is my understanding so far that the district court has ordered that that money that has been deposited in the escrow account be used for the rerun.

Mr. Scott. Would they be entitled to reimbursement if it turns out that they did not have to pay?

Mr. Colgate. I do not know the answer to that question. I could supply it for the record.

Chairman Hoekstra. Will the gentleman yield?

Mr. Scott. I will yield.

Chairman Hoekstra. And I will extend your time.

Mr. Scott. I will yield.

Chairman Hoekstra. I am confused. What is the escrow account?

Mr. Colgate. Essentially there has been an escrow account established that has deposits of, oh, initially, $1.4 million. There is about $832,000 remaining in it. It is my understanding that it is funds that have been deposited from some of these fines and other restitution.

Chairman Hoekstra. So these are fines, these are not teamster’s contributions to the escrow account; these are fines from the illegal activity in the last election that have been put there; this is not Teamster money?

Mr. Colgate. In a general sense, that is my understanding.

Chairman Hoekstra. I thank the gentleman for yielding.

Mr. Scott. If there were not a question of who pays, where would that money go?

Mr. Colgate. I do not know the answer to that question.

Mr. Scott. You indicated that the IBT had agreed to share some of the costs?

Mr. Colgate. It is something that we have been negotiating with the union to date.

Mr. Scott. And they had part of the negotiations included a substantial share of the rerun; is that correct?

Mr. Colgate. Well, again, this is a matter of ongoing litigation and ongoing negotiations, so I wouldn't want to go too far in how we characterize it, but it is something that we have been discussing with the union.

Mr. Scott. And most of those offers were made before the Teamsters won in court; is that right?

Mr. Colgate. That is my general understanding, yes.

Mr. Scott. I used to practice law. I mean, if you negotiate before a court and then lose, all of the offers that were offered before you lost evaporate, so you wouldn't expect them to be as generous now that they are on the winning side of a court decision as they were before no one knew what the court decision would be. In fact, at the time some of these negotiations were going on, you were the ones who were in court and they were appealing. You wouldn't expect them to be as generous now that they are the prevailing party as they were when you were the prevailing party, would you?

Mr. Colgate. I would hope that they would be extremely generous.

Mr. Scott. Thank you, Mr. Chairman.

Chairman Hoekstra. Mr. Colgate, you took the words right out of my mouth. I strongly agree with you.

Mr. Hilleary.

Mr. Hilleary. Thank you, Mr. Chairman. Thank you, gentlemen, for coming in this morning.

Mr. Sever, I had a couple questions, really on a slightly different subject than we have been going over.

You are aware a while back on March 26th, we had some testimony from some international trustees of the IBT regarding general executive board meetings that have taken place, and he testified also to the existence of certain tapes regarding those meetings; you are aware we had that testimony?

Mr. Sever. I am aware there was testimony. I don't know what the discussions were or what the committee asked of these Teamsters. Some are former Teamsters that retired. But, Congressman Hilleary, I would try to answer any questions.

Mr. Hilleary. Well, he testified, and there was an indication that tapes existed, which I think has been corroborated by the IBT, of these meetings, and he indicated possibly some things went on in these meetings that were not quite right; maybe, possibly, including physical threats, certain types of retaliatory action, maybe even manipulating pension funds.

I don't know what all is on those tapes and what went on in all of those meetings, but there were some implications made. And you are also aware we have had a subpoena out to try to gather information, and a high priority for us would be trying to get those tapes. And you can see why those tapes might be relevant to this investigation. We have had guilty pleas, we have had further indictments, we may have other indictments. These tapes are relevant, would you not agree, to what we are trying to get to here?

Mr. Sever. Well, if they are relevant to, you know, legitimate responses from people that were brought in front of your committee, I would understand that. But if you would let me explain as briefly as I can, you know, there are many times we have disgruntled Teamsters,some of them are officers, and certainly in listening to Chairman Hoekstra's presentation with respect to international trustees, two of which appeared in front of your committee, Brother Simpson and Brother DeRusha.

And certainly, when we got elected in 1991, and I have to add this to this part of the question or response, those were the three trustees that ran on a different slate, but no one opposed them and they got in at those 1991 elections by acclamation.

We, of course, got sworn into office and took office on February 1 of 1992, and we started our normal board meetings. And certainly all of us know that at times board meetings are like committee meetings; they get off on different avenues.

But I need to say this to you, sir, and I will shorten it very quickly. We had a lot of political overtures raised by those trustees, and ultimately they were not permitted to attend the board meetings because they are not board members. There was the information released out from our financial departments, and the general president decided they should not be present in those board meetings. However, we let them conduct every audit and every review of our records, as the constitution provides, and they signed off on every one of those minutes that they audited.

Mr. Hilleary. I am just trying to get at, and I have got of course a limited amount of time, as the chairman has referred to.

Mr. Sever. I apologize, but--

Mr. Hilleary. What I am trying to get at is: There is some relevant information on those tapes and we would like for you all to turn over those tapes. And why haven't you done it, and when are you going to do it?

Mr. Sever. Let me say to you, I discussed with legal counsel, and one of the concerns that I have is that to get them reproduced--they are old tapes, and it is going to cost substantial amounts of money. I believe the cost is somewhere around $10,000. I don't feel, at least in my opinion, that the international should be responsible for that.

I will continue--I guess counsel has advised me we have agreed to the committee's request that an independent third party can review the tapes. I understand that counsel is handling that with the staff here, the committee staff, I hope.

Mr. Hilleary. Not only that, Mr. Sever, I think the FBI is going to pay for certain expenses on recording that. And given that maybe this third party is going to protect your interests in irrelevant material on these tapes, we see no reason why you folks can't come forth with those tapes because, you know, Teamsters is an honorable organization, and the longer this drags out because folks do not turn over relevant material, the worse it looks for individual members on the Teamsters, through no fault of their own, because there were a few folks at the top that did some things they weren't supposed to do.

It seems to me, in your position as acting president, you have a duty to those members to not drag the organization, which is an honorable organization, continue dragging it through unpleasant publicity because you won't turn over these things. And we are going to get to the bottom of it. Why not do it as quickly as possible, let the chips fall where they may, and let an honorable organization go forth honorably? And I would just ask you, since it seems your concerns are going to be protected, if you will not commit to us today to in a timely manner produce those tapes for this committee.

Mr. Sever. Congressman, I want to reveal any information that is necessary for your committee or any other investigative committee, and I will cooperate to the best of my ability. However, I will review these steps with my legal counsel. Thank you for your statement.

Mr. Hilleary. Okay. Well, thank you for your questions and answers.

Chairman Hoekstra. Mr. Ballenger.

Mr. Ballenger. Thank you, Mr. Chairman.

Mr. Sever, you mentioned the two trustees, or the three trustees that were elected unanimously, and they were the auditors; but that I guess the ruling board of the general board of your organization generally, the executive board, just decided not to let them participate in meetings. You also mentioned that you have chosen three trustees to audit everything that is going on in the office that you now are head of.

Mr. Sever. I didn't choose three trustees, Congressman. Under the consent decree, we had an understanding with the problems that we had regarding two fraud auditors coming in to review our expenditures, and they would be under the authority of Attorney Levy. The trustees that I am talking about, elected trustees, are the three international trustees that normally, under the constitution, review those records likewise.

Mr. Ballenger. What I am talking about, are they allowed now to participate? Those particular trustees who were left out before, they are not the auditors you are talking about?

Mr. Sever. They are no longer auditors, Congressman, they have retired. The ones that were here in front of Mr. Hoekstra's committee have retired, at least two of them, and we have new auditors that were elected in our last 1996 elections.

Mr. Ballenger. Well, since you all precluded the auditors before from attending meetings, do you not have the same authority to do the same thing to the new ones you just have appointed?

Mr. Sever. I didn't appoint them, I didn't

Mr. Ballenger. Whether you did or not, you still have the authority to keep them out of the meetings?

Mr. Sever. Congressman, in all sincerity, likewise the Chairman here has the authority here to have who he wants in front of his committee. Likewise, the chairman, who is the general president of the international, has the same authority, and he, you know, used his authority with discretion. I have since permitted the new elected trustees to attend our meetings. They are not to participate in the actions of the board because they are not board members, but I have permitted them to attend our general executive board meetings.

Mr. Ballenger. I don't know what you all consider auditors, but when I talk about an auditor, it is an individual who looks at the financial arrangements and looks at the checks to be sent and so forth and so on. And if these auditors are the ones that are supposedly, I mean, you said you are going to make sure nobody misspends money this time around and so forth.

Mr. Sever. Well, I am going to have safeguards. It is very difficult, I believe, to go out and look at every person that you have employed in your staff or worked for you to make certain there is no misconduct, but I am going to do everything within my authority to make safeguards eternally that prevent that with the elimination of a lot of people endorsing or authorizing payments of expenditures. I will do that and I am doing that. And since the auditors that we talk about, the government auditors, the fraud auditors, every expenditure that was submitted to them was reviewed and it was approved by them.

Mr. Ballenger. But at the hearing, we sat and listened to the man who said he approved and so forth, and as the Chairman said, all he did was look at the numbers and see if the dates were right and so forth and that if you wanted to buy a Lear jet, and it sounded all right to him, he would go ahead and sign it. So that auditor is not that much of an auditor; he is just a lawyer looking over your shoulder.

Mr. Sever. Well, listen, Mr. or Congressman, I am sorry that is the kind of auditors they selected. I didn't select those auditors.

Mr. Ballenger. I am not blaming you.

Mr. Sever. I think if they are fraud auditors, they ought to question anything I do, you know, if there is a question to be answered. I certainly don't intend, nor did I ever make an expenditure that I thought wasn't for just cause.

Mr. Ballenger. Let me ask one question. The question I ask is, as far as the expenditures that go through the Teamsters now, you got an auditor that is really a lawyer that doesn't do anything but check numbers, and you have auditors that were elected to the board but that you don't have to necessarily have in meetings. Do you really have anybody that checks it, unless you want to agree to it?

Mr. Sever. Congressman, I do confer with these international auditors that were elected. They work with my accounting department. We give them every information that they request. We encourage them to look at these books to make certain everything is correct, but we even go a step further. We have outside auditors and CPAs that come in and affirm that everything we do is done according to accounting principles.

Mr. Ballenger. Thank you, Mr. Chairman.

Mr. Sever. Thank you very much.

Chairman Hoekstra. Mr. Levy, as we understand it from the testimony, has a title of the auditor, or independent financial auditor. He is not an attorney. He is a CPA, but he has not worked as an auditor. All right. So we have been using his name--

Mr. Ballenger. I stand corrected.

Chairman Hoekstra. I think everybody does. He has been given so many different titles and descriptions, I just wanted to get the record straight. He is a CPA, he is not a lawyer. And as far as we can tell, and we have a series of questions on that as well, we don't believe he is working as an auditor.

Mr. Parker.

Mr. Parker. Thank you, Mr. Chairman.

First of all, let me just say, this is the first day that I have been on the committee and I beg the indulgence of individuals, my friends on the other side of the aisle, in just trying to get up to speed on some of this. And some of it is somewhat mind-boggling.

I believe strongly, and I think that everyone, all the witnesses, would agree to this, that we all have a fiduciary responsibility to the membership of the Teamsters. I believe that there are several forums that can be utilized to express that fiduciary responsibility, but I think the Congress is one of them. We are one of the few things that can actually step in and do something.

The Teamsters are hardworking people. They work extremely hard and this money is something that is their money, they are entitled to make sure that people are spending it wisely and in their behalf.

I have been somewhat fascinated by some of the discussion. Let me just ask a couple questions; it just helps me get up to speed a little bit as far as where we are headed.

I realized Mr. Sever, I have been told you don't stay in Washington on the weekend; you go back home.

Mr. Sever. That is right; I do. Sometimes I travel from home on the weekend. I may leave on a Friday evening and go to a local union and then I come back home, and then I drive back almost every weekend from Washington, D.C. I leave Sunday afternoon and come back to work.

Mr. Parker. I am a lot like you, I don't care for this place a whole lot, and come January, I am not going to come back. I think that 10 years up here is long enough to know better. But the point is that I am not crazy about it either, so I kind of understand where you are coming from.

But prior to you coming here and being elected in 1991, I understand, I mean, you have worked all your life?

Mr. Sever. Yes, I have.

Mr. Parker. And you understand, I think, what the average Teamster out there is going through. And I am supposing you are not an independently wealthy individual. You may be, I don't know.

Mr. Sever. No, I am not.

Mr. Parker. But I look at some of the checks, for instance, that are going through these accounts. That is a lot of hours that the Teamsters put in on some of these checks, to put the money in on this, and I have got some pretty pointed questions that I would like answered basically.

You had made the statement, and we have got copies of checks and all, that two signatures,now this is in 1996, two signatures were required for IBT checks, and the two signatures on the checks were Ron Carey's and your signature; and I am supposing they were stamped on or whatever?

Mr. Sever. Yes.

Mr. Parker. Auto-pen, that type of thing.

Did you have an amount of money, I mean, if a check was X amount of dollars, it was just normal, let's pull a figure and say $10,000. Was there a figure out there where you and Mr. Carey had to look, physically look at that check?

Mr. Sever. Not really. No, there wasn't.

Mr. Parker. When we are talking about 150,000, 85,000, those are pretty sizable sums of money. There was no--these checks just went out and they went through some procedure out there of approval. You made mention there was internal documents that you would look at, your office would look at, before you would approve a check; is that correct?

Mr. Sever. Yes. For what purpose that money was for, or the expenditure was for it, or who requested it.

Mr. Parker. I know the committee has asked for generalized documentation, and I have heard people on the other side of the aisle talk about it is too general in nature, but let me get real specific. I have four checks here. One is made out on October the 24th of 1996 for $85,000 to the National Council of Senior Citizens PAC, listed as a contribution. I would like to see the internal documentation that approved that check, and I think it is important for the committee to see that.

Another is a check to the AFL-CIO for $150,000 on November the 1st of 1996, listed as a contribution. I would like to see the documentation on that.

Another is a check on October 31st, Voting for America, Project Vote, for $75,000. I would like to see the internal documentation on that.

And then on October the 24th of 1996, Voting for America, Project Vote, for $100,000. I would like to see that.

I think those checks were involved in this whole Carey incident, as far as the questions that were raised. But could you provide that to the committee?

Mr. Sever. It is my understanding, Congressman, that the committee has already been provided with those documents.

Mr. Parker. Well, I am glad I asked everybody's indulgence then.

Now, the point that bothers me about these checks, the amounts of these checks, is that we are in a situation where mistakes were made, and I think you would agree that mistakes have been made. What has changed in that documentation? I mean, have you changed the procedure at all or is it the same thing in place that was there before?

Mr. Sever. No. Most certainly, after a mistake or misjudgment is made, certainly we don't want that same type of error to become reality again; and I have asked to review, as I have indicated earlier, every request or document that has requests for contributions that are large sums, I will review that from the requesting person.

Mr. Parker. Have you set a certain level?

Mr. Sever. Congressman, if I may, some of these we have already got outside counsel and we view them. We have a conference call with the supporting document that each person has for their review, and if all of us agree, then we make that expenditure.

Mr. Parker. What is the threshold for that?

Mr. Sever. Would you repeat that?

Mr. Sever. What is the threshold? I mean, is it a check above 25,000 or 10,000 or 50,000 or what?

Mr. Sever. Any checks over $10,000.

Mr. Parker. So you individually look at those checks?

Mr. Sever. We look at the supporting documents, and before an expenditure is made, we have outside counsel to give their approval also.

Mr. Parker. I thank the Chairman.

Chairman Hoekstra. Mr. Miller.

Mr. Miller. Thank you, Mr. Chairman.

Mr. Colgate, let me ask you, under the current situation we have today, the status quo between the court's decision and the prohibition on monies used on the appropriations rider, what is our ability to go forward with this election?

Mr. Colgate. It is difficult. I mean, we estimate the election officer has given us an approximate budget for running the election of $8.6 million. We have identified, in these various sources that were included in my testimony, total funds of about 4.1 million, with a shortfall of about 4.5 million. So even if we could get the Congress to agree on allowing us to use these funds, these prior year funds that aren't subject to that 1998 cap, we still have a significant shortfall.

Mr. Miller. So can the election go forward?

Mr. Colgate. At this point, we don't see now how it could go forward without the funding.

Mr. Miller. As I understand, and, again, I don't know all the details, but as I understand it, Mr. Carey is precluded from running for reelection; is that correct?

Mr. Colgate. That is my understanding.

Mr. Miller. A number of people have been indicted, a number of people have paid fines and pled guilty to various actions. Now the question is whether or not this union can move on and establish its future through a free and fair election. But we are not going to be able to do that because, clearly, our current situation today is that if there is going to be Federal supervision, I think given the track record, most people probably believe there should be Federal supervision the Federal Government is going to have to pay for that, absent some negotiated settlement with the teamsters.

But, as Mr. Scott pointed out, you negotiate on the courthouse steps and you go to court; you start over again. And where do we go from here, where do the members of the Teamsters Union go to get this election carried forth with Federal supervision?

Mr. Colgate. We face a very difficult situation here. I mean, clearly, the executive wants to move forward with this election. We want it supervised. We all saw the benefits of supervision by the very fact of the supervisor's ability to deal with the issues that were raised in the last election. Supervision is critical.

Mr. Miller. The election is scheduled for when?

Mr. Colgate. Right now the election is scheduled for mid-October. That is, assuming that we can get it up and funded, I believe, by the middle of June.

Mr. Miller. That is assuming Federal supervision leading up to. I mean, there is a whole preliminary process before you get to the day you ballot in the middle of October. So if we sit here and do nothing, if we sit here and do nothing and let the appropriations rider lapse at the beginning of the fiscal year, what would happen then?

Mr. Colgate. Wel--

Mr. Miller. Does $4 million take you to where you have to be by election day in October?

Mr. Colgate. No, it does not; not to my understanding, no. We would face some type of delay.

Mr. Miller. So the remedy in this case lies with the Congress?

Mr. Colgate. It would be the most direct way to remedy this, given my understanding.

Mr. Miller. Given the court determination?

Mr. Colgate. Given my understanding, correct.

Mr. Miller. And the status of the court determination is you are asking for a rehearing, you are not appealing this, you are asking for a rehearing?

Mr. Colgate. Before the full circuit, that is correct.

Mr. Miller. So we are asking potentially the same circuit that made this decision to decide otherwise?

Mr. Colgate. The full body to review what the panel ruled.

Mr. Miller. That would be determined when?

Mr. Colgate. There is no way to predict when that would be determined.

Mr. Miller. So if we are going to have a timely election, if we are going to have Federal supervision of that election, and hopefully a free and fair election, the Congress is going to have to remedy the situation that it got itself into when we provided for the prohibition on the use of funds, because it is extensive enough that the only amount you have available to you is potentially somewhere around $4 million.

Mr. Colgate. And that in itself, I want to make this clear would require, in the large part, consultation with the Congress, even for those funds.

Mr. Miller. I understand that. Because I guess there are those who would argue, and maybe quite properly so, the prohibition may extend to some of those funds. You are suggesting those funds are potentially available, but whether or not they, in fact, become available is yet to be

determined.

Mr. Colgate. They are, by and large, available after we complete a notification process.

Mr. Miller. That is assuming it all goes well?

Mr. Colgate. That is correct. We have been very collegial and cooperative in any of these notifications through our appropriators because we ultimately realize that the Congress is the banker for executive branch operations.

Mr. Miller. Finally, let me suggest this, because I think clearly there is an investigation that this committee is involved in and the Justice Department and others are involved in about the previous activities with respect to officers of the union and some of the checks and all the things that have been discussed here.

But the question of getting on with the election, the question of getting on with the election, it seems to me, raises the question that was raised earlier here, and that is, given what we have now learned from two previous elections, I assume we would have expansive use of the term "supervised" in the next election.

Mr. Colgate. I think everyone wants a very thorough supervision of the next election.

Mr. Miller. Because in the 1991 election, we had a very expansive view of supervision, as I understand it. We were deeply entwined in that process to try to bring about that election, which a lot of people thought turned out fairly satisfactorily.

In the 1996 election, assuming that election means a democracy, we were not so deeply entwined and we have been burned rather badly in terms of having Federal supervision of that election. So I would assume that the $8 million that you are talking about takes us forward at the benefit of hindsight to run an election where we could get a result that the members of the Teamsters Union, the public, and the others would have confidence in at the end of the day.

Mr. Colgate. That would be my hope. I heard very bipartisan support for the new election officer from both sides. The election officers presented us an $8.6 million budget, and our preliminary review is that it is reasonable and the correct way to go.

Mr. Miller. But under the current situation, it is your testimony that we can't get to that election date absent some action by the Congress?

Mr. Colgate. I am on the horns of a dilemma.

Mr. Miller. Yes. Thank you.

Chairman Hoekstra. Thank you, Mr. Miller.

A couple things. The Federal Government was involved in 1996, basically to the same extent they were in 1991, isn't that correct, except the only difference was maybe the funding?

Mr. Colgate. Yes.

Chairman Hoekstra. So, I mean, the reason we had a failed election in 1996 was not because we stepped back and weren't as involved, the primary difference is we had election officers in place. The only difference was the Teamsters paid in 1991, we paid in 1996.

Mr. Colgate. I think that the fruits of the whole thing were what the election officer found as a result of the 1996 election.

Chairman Hoekstra. But we were as involved in 1996 as we were in 1991.

Mr. Colgate. That is my general understanding from counsel.

Chairman Hoekstra. And there are a number of ways out of this choice. One is for Congress to act; the other is for the Teamsters to say we want a supervised election. It is tied up in the courts. We are not going to risk not having a supervised election. They could step to the plate and say we are going to pay for it.

Mr. Colgate. If we can enter into an agreement with my good friend next to me here, I am sure we could negotiate. That is one option.

Chairman Hoekstra. He looks like a very generous individual to me.

I will yield my time to Mr. Norwood.

Mr. Norwood. Thank you, Mr. Chairman.

It doesn't take generosity at 50 cents a month. I think there should be no problem in discussing how to pay for this.

A good friend of mine from Mississippi told me he was leaving this town because most of the people inside the Beltway thought that "manual labor" was the President of Mexico. And I will have to tell you, I don't believe that is true with the Teamsters; they are hardworking people. And I want you to understand, that is why these questions, Mr. Sever, are being asked on behalf of your members.

Now if you will get out your--we were talking about, when we last visited, the memo from Jere Nash to Ron Carey, the document that you pulled out. When did you first see this document, Mr. Sever?

Mr. Sever. I believe it was in a Hoffagram. I am not positive.

Mr. Norwood. It was in when?

Mr. Sever. It was in some kind of a Hoffagram.

Mr. Norwood. A date?

Mr. Sever. I don't recall a date. I would say it was sometime in 1998, early 1998, or somewhere in that area.

Mr. Norwood. I would like to, if I could, review certain portions of this memorandum with you. On the first page, Mr. Nash mentions Bill Hamilton, who was the political affairs director for the IBT, and he states that Mr. Hamilton, and I quote "did whatever we asked. Assigned staff throughout the country to the campaign, raised money, and in the last month of the campaign used his staff to stay in touch with the friendly local leaders all over the country," end quote.

Did you know during the campaign that Mr. Hamilton was using his staff to help with the Carey campaign?

Mr. Sever. Never did I know that. Could I ask you, Congressman, if I could make a brief statement regarding everything that is here, and I will be glad to try to answer any question you may have.

This memorandum is dated January 27, 1997. It is well after the 1996 election. The people that are mentioned on here, to my knowledge, are honorable staff people at the IBT. I have every respect for them. If there ever comes a day that they are proven to have been involved in anything that was inappropriate, certainly I will take whatever action necessary to remedy that situation.

And I would also like the committee to understand that the person that wrote this memorandum, Mr. Nash, has been indicted for wrongdoing and has plea-bargained in this matter. And I don't think, Congressman, but I will try to answer your question, I don't think it would be appropriate for me to answer questions relative to these allegations because I don't think they have merit. I think that someone should be judged innocent until proven guilty. But go forward, Congressman, and I respect you.

Mr. Norwood. Mr. Sever, we are just simply trying to get some information. I don't question these people, but I wonder, do you think all of them, were they aware that what they were doing was a violation of the Landrum-Griffin Act, to use IBT resources for an individual campaign for president of the IBT, do you think, I mean, do you respect all of them, do you think they knew that?

Mr. Sever. Congressman, I know that I was advised, not only by the rules of the procedure in that election, that all of us were advised, every one of us had copies of it, and we were advised we could not use any moneys, you know, such as allocated here, or use any international facilities, you know, to get involved with the election process. Now, I can't speak for each one of these individuals as to the allegations raised here by Mr. Nash, but I am sure that I was aware of what we were to do and what we were not to do.

Mr. Norwood. Well, when you first learned that Mr. Hamilton had used the IBT staff for Mr. Carey's reelection campaign, did you conduct any investigation or take any action against him or question him or say, "Hey, what is going on here," or "This is against law, the Landrum-Griffin Act." Did you talk to him about that?

Mr. Sever. Congressman Norwood, there are ongoing investigations, they are still pending, and I think it would be inappropriate if I--and I have cooperated with every investigative authority to assist and help them wherever I can and that is where the record is, Congressman.

Mr. Norwood. You are right, it is ongoing, that is what these questions are all about. Did Mr. Carey take any action or investigate Mr. Hamilton once he saw this memo from Jerry Nash? I mean, did he call him in and say, "Hey, what the dickens is going on here"?

Mr. Sever. Again, I don't know what General President Carey had done, if he had done that or if he questioned Mr. Hamilton or not. I don't have the answer to that, Congressman Norwood.

Mr. Norwood. All right. Let's try another one.

On the second page of Jere Nash's memo, Mr. Nash talks about Bob Muehlenkamp and he states that Mr. Muehlenkamp, and I quote, "turned his organizing department over to the campaign and became a full-time campaigner himself," end quote.

Were you aware in 1996 that Mr. Muehlenkamp had turned the IBT's organizing department over to the Carey campaign? Did he do all this in secrecy?

Mr. Sever. Once again, I don't believe that Bob Muehlenkamp had ever done such a thing, nor would he ever think of doing such a thing. I have confidence in him as a director of our organizing department, and certainly I don't believe that he had done anything improper.

Mr. Norwood. So there was no reason for you or Mr. Carey, then, to conduct an investigation to see if he had done anything improper? In other words, you knew him so well you just made the judgment there is no way he would have done that?

Mr. Sever. No, that is not the case. He is being investigated by the Internal Review Board and they are requesting documentations and information necessary for their investigation, and I am conforming with them in every way that I possibly can.

Mr. Norwood. Just yes or no; is Mr. Muehlenkamp still at the IBT now?

Mr. Sever. Yes, he is.

Mr. Norwood. Okay.

Chairman Hoekstra. Mrs. Mink.

Mrs. Mink. Thank you, Mr. Chairman.

I yield my time to my colleague, Mr. Scott.

Mr. Scott. Thank you, Mr. Chairman. Thank you, Mrs. Mink.

Mr. Colgate, you indicated you were in a dilemma. Basically it is not really a dilemma. You either have to win in court or you can't supervise the election unless Congress undoes what it did. Is that pretty much the case?

Mr. Colgate. That is the dilemma I am facing.

Mr. Scott. If you were to win in court, how long would it take you to win in court?

Mr. Colgate. There is no way of predicting because there is no way of predicting when the full panel would render its decision.

Mr. Scott. Have the arguments taken place?

Mr. Colgate. Counsel advises me that the arguments have not taken place and has not even been granted by the circuit for a hearing.

Mr. Scott. So you could lose pretty quickly; but if you were to win, it would take a significant amount of time?

Mr. Colgate. It is hard to predict.

Mr. Scott. And it would make the present projected schedule impossible?

Mr. Colgate. It would put that schedule at great risk.

Mr. Scott. Impossible. It would be impossible to keep that schedule if you were to wait for a victory?

Mr. Colgate. It hypothetically could.

Mr. Scott. Is there any way that you can keep the schedule if you wait for a final court decision in your favor?

Mr. Colgate. Unless we could come to a joint resolution with the IBT and available Federal funds, it would be impossible, from what I understand.

Mr. Scott. So your situation is that you cannot proceed with an election as scheduled, winning in court. The IBT has no reason to negotiate now that you have taken it all the way to court. Had they at one point agreed to split the cost 50/50?

Mr. Colgate. That is my understanding, yes.

Mr. Scott. And what happened to that agreement?

Mr. Colgate. I think my own personal view is--you characterized it very well about courthouse steps.

Mr. Scott. Well, wasn't the legislation a part of the reason that fell apart?

Mr. Colgate. Counsel informs me that is correct.

Mr. Scott. So we were in good shape before the legislation had taken place; we could have gone forward with an election with a 50/50 split. Legislation blocked it. You went to court and the Teamsters won, and now they are in a situation where you are on the hook for the full amount if you want to supervise the election, according to the schedule?

Mr. Colgate. That is basically the dilemma we face.

Mr. Miller. Will the gentleman yield?

Mr. Scott. I will yield.

Mr. Miller. I would just like to raise the point, it would seem to me here a couple comments have been made that Mr. Sever looks like a generous man, if he just had generosity in his heart and what have you. It also seems he is a man that has a union that is in serious financial trouble and has some obligations not to take on expenditures that he is not required to undertake.

There is an old adage in the court that you are entitled to your bargain. And this consent decree was hammered out--and if you go back in time to the time it was entered into, there was a lot at risk for both parties--and supervision and cost and all that was hammered out, and they are entitled to that bargain.

And I guess at one time, you know, the notion was that they would split this, that was interrupted by the congressional act, and they are entitled to go back to their bargain; because to talk about $4 million or $5 million, or maybe more, out of a union that has the kind of financial troubles that people keep lamenting up here, I think raises some serious questions in terms of his obligations.

If the government had won that case and we said, "Okay, we won but now we are going to pay for the election," there would be all hell to pay about our obligation to the taxpayers as a result of that case. I don't see that his position is much different than that. We may not like the circumstances, but I don't know that his position is much different than that at this point.

And so, you know, when you say theoretically or hypothetically it may be difficult to have this election, absent change by some action by the Congress to release some funding capabilities, I think it is not theoretical or hypothetical, I think it is a fact, because these so-called fiduciary relationships run in different directions and people have different fiduciary relations than others.

We would have one to the taxpayers had we won in court. You know, we had one under the consent decree to get a free and fair election. We fumbled the ball somewhere along the line. And now to suggest that that burden is going to be placed on a union that for a whole host of tragic, unacceptable, and illegal reasons finds itself in this financial situation raises also serious concerns for that union.

I thank the gentleman.

Mr. Scott. Reclaiming my time, Mr. Chairman, I would like unanimous consent to enter into the record a letter from Zuckerman, et cetera, law firm, which comments on the gentleman from Mississippi who made a point that he would like to see specific records to determine specific checks and documentation. This outlined some of the problems with the overbroad requests for documents in just 2 paragraphs. On Monday for the first time--this is dated May 6, 1998--he requested all expense reports and credit card bills for 33 employees of the IBT for the 6-year period, 1992 to 1997. The IBT is willing to produce, to request the records. This is a project that will require scores of hours of work which must be undertaken as we labor to review tens of thousands of other documents. The IBT can produce for you the requested documents for 1996, which is the year I assume is the most relevant, by the end of the week. And I propose that you either review the 1996 records and advise us whether you really want the records for the other years or advise us as to your priority with respect to the years.

It also says that you have requested all of the records of the Covington and Burlington law firm, the investigator hired by the firm in connection with the firm's representation of the IBT. The vast majority of the documents requested a privilege and all are unrelated to the election irregularities of the 1996 IBT elections. Neither firm even worked for the IBT after 1995. It also points out that over 50,000 IBT documents have been already produced. And I would like this letter placed in the record.

Chairman Hoekstra. That will be submitted to the record without objection. Thank you, Mr. Scott.

Chairman Hoekstra. Just to make a comment, it is an interesting argument that, and I think Mr. Miller is correct, we do have a fiduciary responsibility to the taxpayers. That is why we passed those amendments last year. But the taxpayers must pay for the rerun because we are bound by the consent decree, when in fact the election was thrown out because a sitting president of the Teamsters violated both the letter and the spirit of the same consent decree.

Why should the union leadership hide behind the consent decree, when the only reason we are here even talking about this is because, you know, they violated the decree?

Recognize Mr. Norwood for his 5 minutes.

Mr. Norwood. Thank you, Mr. Chairman.

Mr. Chairman, Mr. Sever, let's go back to the Jere Nash memo, and we will try to finish that up, because several individuals on that list were referred to as being people who went on the road full time for the reelection campaign; in other words, paid staff members of IBT who improperly worked full time on the Carey campaign.

By the way, is Coleen Dougher still with IBT?

Mr. Sever. Would you repeat that again?

Mr. Norwood. Is Coleen D-O-U-G-H-E-R still with IBT?

Mr. Sever. Yes, she is.

Mr. Norwood. How about Joe Henry? Is he still with the IBT?

Mr. Sever. Yes he is.

Mr. Norwood. And Bob Hauptman is still with the IBT?

Mr. Sever. Yes he is.

Mr. Norwood. And Jack Barmon is still with the IBT?

Mr. Sever. No, Jack Barmon is no longer with the IBT.

Mr. Norwood. Do you feel like that that might present a perception problem? I know you are investigating these individuals and trying to see if the Nash memo is correct, but do can you see a perception problem for the rest of us in that most of the people who have been accused at least are still with the IBT?

Mr. Sever. Well, no, I don't see a perception problem, Congressman Norwood, because of the fact that the allegations are being made here by a person that has been indicted and, you know, he can say whatever he wishes. But I think everybody has the right, and I don't see these individuals as what he perceives them to have done or said, but I indicated--

Mr. Norwood. But you are investigating to see--

Mr. Sever. The internal review board is investing some of these people. I don't know if they are investigating all of them or if they are under investigation. They are looking for records on the organizing department, I do know that.

Mr. Norwood. The election officer refused to certify the 1996 election because of violations of the Landrum-Griffin Act in money laundering schemes. So far people have been indicted; three have pled guilty to these acts in the United States court. Many of the facts are pretty clear, I believe, in this case and are fairly well known.

Do you agree with the election officer's finding that the 1996 election should not have been certified?

Mr. Sever. I don't necessarily agree that they should not be certified. I believe, though, that we are, as the Second Circuit Court in New York had indicated, we are--we were the victim of embezzlement. I believe that thoroughly; everybody ought to be investigated in concluding those investigations of court actions. I believe the appropriate action should be taken against anyone that committed any misconduct.

Mr. Norwood. So do you believe that perhaps there are others involved other than the three that have pled guilty?

Mr. Sever. I wouldn't have knowledge of that, Brother Norwood or Congressman Norwood.

Mr. Norwood. I like Brother Norwood better, frankly.

Mr. Sever, I want to tell you that I am not a lawyer and sometimes some of these questions don't suit me and they are embarrassing, but we have to ask them. What did you do prior to becoming secretary-treasurer? What was your job?

Mr. Sever. My last job was I was the president of Teamster Local 30 in western Pennsylvania.

Mr. Norwood. And what did that job pay?

Mr. Sever. I ran or operated the local. There was about 2,400 members. I negotiated collective bargaining agreements for those members, I had various crafts, United Parcel Service, the freight municipalities, really a good group of members.

Mr. Norwood. And it paid?

Mr. Sever. I received somewhere between 46 and $48,000.

Mr. Norwood. Thank you very much.

Mr. Chairman, I would like to reserve the balance of my time and let you go ahead for a minute.

Chairman Hoekstra. I thank the gentleman for his generosity, unexpectedly.

The Nash memo, I think, is relevant because it came out almost immediately after the campaign, and it also came out well before the April and May time frame where the other individuals were indicted or reached their pleas with the second district.

I will go to Mr. Parker.

Mr. Parker. Thank you, Mr. Chairman.

Now, Mr. Sever, let's go back to those checks again. You have given to the committee documentation as far as how those checks were done, the checks that I talked about awhile ago.

Mr. Sever. Yes.

Mr. Parker. But now you have implemented a new procedure because of the problems that existed with the election, and the procedure itself has been changed; is that right?

Mr. Sever. Well, I--it is not a written procedure. I eliminated the number of people that can, you know, endorse those--

Mr. Parker. You are saying to me that these checks, the same mistake could occur again?

Mr. Sever. I didn't indicate that.

Mr. Parker. So you have changed some things so that mistake would not occur again.

Mr. Sever. Yes.

Mr. Parker. Could you provide the committee the changes that you have instigated and implemented which would prevent the same mistake occurring again?

Mr. Sever. Yes. Anyone

Mr. Parker. That would be very helpful to us.

Mr. Sever. Okay. Anyone making a request for large sums of money, I will thoroughly review with that individual why that request is made and he must give some documentation why it is necessary.

Mr. Parker. Okay, that is what I want to know. What is the difference between the prior documentation and the current documentation that gives us a difference between the two?

Mr. Sever. I don't know what and how they were reviewed. There were more people who had authority to sign off--

Mr. Parker. But you were acting president, so you have that authority to get that information to us.

Mr. Sever. Yes.

Mr. Parker. So I think that that would be helpful.

[The information follows:]

******** COMMITTEE INSERT ********

Mr. Parker. Let's get back to this Jere Nash thing.

Mr. Sever. Sure.

Mr. Parker. Now I know that you can't answer a question on everything, you can't_you know, you have got a lot of people listed in this memo. But one person you can answer for is on the second page. It is a guy by the name of Tom Sever, and it says, quote, "personally gave over $70,000 to the campaign."

Did you give 70,000 to the campaign?

Mr. Sever. Yes. I could probably support that with documentation.

Mr. Parker. I would think so. That is a lot of money for--let me ask you this.

Mr. Sever. I have a lot of faith--could I say why?

Mr. Parker. Sure.

Mr. Sever. I have so much faith in General President Carey that I would do anything for him. He has preserved and sacrificed for--in behalf of all our membership to rid this union of mob influence, and he made a lot of sacrifice for all of us. I would never have that problem.

Mr. Parker. Okay, let me ask you this about Mr. Nash.

And first of all, that $70,000, that came all from your personal funds?

Mr. Sever. Yes, it did.

Mr. Parker. Okay. Let me ask you--let me just mention something about this Nash memo.

You have said several times, Mr. Sever, that this memo was written by a guy who wasn't indicted but pled guilty. And the impression that you have given is that the reason he wrote this memo was because of that.

Well, now let's talk about the time frame as far as how this thing was done. Now, the election occurred in 1996; right? This memo was dated January 27 of 1997. So on January the 27th of 1997, Jere Nash was in good standing with everybody. Carey had just won the race. Everything was sweet and nice and special for everybody. Nobody had any questions. There were no allegations at all.

Now the allegations didn't come about until April of 1997. Now from January the 27th you have got, what, 3 months there before the allegations started coming. So when he wrote this memo he didn't have anything to hide. According to this memo nobody had any reason to question him.

Did you have any reason to question him on January the 27th when this memo was written?

Mr. Sever. I had no reason to question him.

Mr. Parker. Okay.

So what I am saying is this man, when he writes this memo he is in good standing, and in April the allegations started coming about. He didn't plead guilty until September of 1997. So the statement that you have made and you keep saying--you said it several times--that the reason we shouldn't pay any attention to this memo whatsoever is basically the inference you are giving is that this is cover for Jere Nash.

Well, he didn't need cover when he wrote the memo in January of 1997. He wasn't looking for cover. And I will tell you, I have heard reports that Mr. Carey has tried to distance himself from Jere Nash and basically say, "Well, I kind of knew him, I knew who he was, but I mean we weren't close or anything."

Now I have got a question for you. Did you know Jere Nash?

Mr. Sever. Yes, I did.

Mr. Parker. Were you close to him?

Mr. Sever. No, I wouldn't consider myself close to him.

Mr. Parker. Now I don't consider myself close to Mr. Carey, I mean, but I don't think I could write a memorandum that was highly personal and confidential. I mean, did you consider Mr. Carey close to Jere Nash?

Mr. Sever. I wouldn't know what their relationship and how close they were to each other.

Mr. Parker. I mean, I find it very interesting. It seems like everybody is trying to separate themselves or distance themselves from Jere, but that memo on January the 27th when he had absolutely nothing to hide, no allegations were made, the statements that are made in here are pretty strong. And I would think as the acting president of the Teamsters, you would take that point into consideration in looking at the individuals listed on this to find out were there irregularities.

Now, I have heard today from my friend from Virginia asking for 33 people out there, their expenses, their credit card accounts. You know, that is burdensome, but you see that fiduciary responsibility you have got to your membership, I would want to know because this has to be cleared, and until this is cleared your membership, the rank and file, can't have confidence in what is going on.

Both sides of the aisle on this committee and this subcommittee want to get this mess straightened up. Now I keep hearing everybody say, well, the government needs to pay. We have gone to court, the government won, then they lost, we are appealing.

Isn't it in the best interests of the IBT to have an election free and fair, to have the rank and file have their wishes met and be able to install the officers that are duly elected by the rank and file of the Teamsters? Isn't that in their best interest?

Mr. Sever. I said that in my opening statement. But let me respond to the other remarks that you made about the Jere Nash position. General President Carey back in 1993, for the first time ever under any collective bargaining agreement that the International ever negotiated, and he negotiated with United Parcel Service, and that was the right that you are innocent until proven guilty, and we had employees that were terminated. And then before we got to the arbitration process, it took almost 9 months. We got that into that agreement, and we think and I believe in my heart that everyone of these individuals deserve the same right; that they are innocent until proven guilty. And I will do anything within my authority to conform to any investigative firm or government body requiring additional information.

Mr. Parker. But, Mr. Sever, I am not saying that they shouldn't be considered innocent until proven guilty. What I am saying is they should not be considered innocent and no investigation take place. I think that this document by Jere Nash provides a basis for you to look at it and go at it from the standpoint of them saying they are innocent until proven guilty; but if misconduct shows up and it is proven, they don't need to be employed by IBT, because if they have done what is in this memo, would you agree that they should not be employees any time further?

Mr. Sever. Once again, Congressman, I am not going to prejudge anyone.

Mr. Parker. I am not asking you to prejudge, sir.

Mr. Sever. I will not do that. However, I agree that if any misconduct is ever found with any employee of the International or my staff, I will take the appropriate action.

Mr. Parker. I thank the Chair.

Chairman Hoekstra. We will begin a third round of questioning.

Mr. Sever_I mean, just following up Mr. Parker, has the IBT done an internal investigation of the people that are mentioned in the Jere Nash memo, or have you left it up to the independent review board in the second circuit?

Mr. Sever. There are multiple investigations going on, ongoing. We are cooperating in every way possible, and we will continue to do so.

Chairman Hoekstra. But is the IBT--are you as the acting president of the IBT conducting an investigation of the allegations that are raised in that memo?

Mr. Sever. I am not personally investigating any allegations. I am cooperating with all the investigative authorities to give them any information necessary to help their investigation.

Chairman Hoekstra. So that means that when you say you are cooperating, that is turning over the responsibility of the investigations or internal monitoring to the second district, the election or second circuit, the election officer, the IRB and committees like this committee; is that correct?

Mr. Sever. Yes.

Chairman Hoekstra. Okay. Thank you.

Mr. Colgate, Marvin Levy, the interim financial auditor for the IBT, has testified before this subcommittee regarding his duties. It was under an interim agreement. Do you know when that agreement is going to be finalized?

Mr. Colgate. I am not really in a position_ this is one topic that I really don't have the understanding. The first time I became aware of it was reading Mary Jo White's letter to you, dated May 18. I am really not in a position to testify and I apologize.

Chairman Hoekstra. You know, we are glad we got the response from Mary Jo White, but we were hoping you would be able to answer some basic questions on that, because the description of where Mary Jo White said the responsibilities of the independent financial auditor were and where Mr. Levy said he was actually operating are like night and day. You are thinking that they are looking at two very, very different jobs.

And before we move to a rerun election, and we met with the election officer last week, before we move to a rerun election, we want those financial controls in place. And we wrote that in the letter to Mary Jo White to begin with, and we want a strict accounting and accountability within the IBT for where the dollars are going, plus we are also very concerned, Mr. Sever, we do take the Jere Nash memo seriously, and I assume you do. But until we get the answers to some of the investigations that either clear these individuals or indicate the wrongdoing and the level of wrongdoing, I am very nervous about moving forward with any election, regardless of who pays for it, because both of those just lay the seeds for another failed election process.

I believe that my colleague here is going to leave when she makes a few closing comments when we get to her time. I just want her to be aware that the Majority will go on to the questioning after she leaves but the Majority will be calling for a meeting to try to facilitate and develop a solution on how we move forward with this election both in regards to the types of controls and changes that we see that need to be put in place and also with the issue of how we are going to pay for that.

We expect that, Mr. Sever--we would hope that you would be or somebody from the IBT would be willing to be a part of that meeting. Mr. Colgate, we would hope that the Justice Department would want to cooperate in that dialogue, we have already confirmed and discussed with Mr. Cherkasky that he would be willing to be a part of that dialogue, to meet with the Majority to work through that process and identify a solution as to how we can move forward and move towards what we all want to have in place, which is a clean, fair election as soon as possible.

So that is the offer that we are extending to the two of you; for Mr. Cherkasky to meet with the Majority to iron out a solution to move forward, and we hope that you will accept our offer and continue the negotiations to make this election happen.

I am assuming, Mr. Colgate, that is something that the Justice Department is more than willing to participate in.

Mr. Colgate. We are always interested in good bipartisan discussions with our bankers, by all means.

Chairman Hoekstra. Well, actually this would not be bipartisan. The Minority has indicated that in a meeting that we had last week, that they are not interested in working through this with us, so it is not a bipartisan, and I wouldn't call it a partisan activity, but we are stepping up to the plate and saying that there is a need for a resolution. We have discussed that with Mrs. Mink and she indicated last week that she was not going to be a party to those dialogs. So now I am asking you if you will participate in a partisan or, let's put it, if you will subscribe to a meeting of interested parties to facilitate this.

Mr. Colgate. We will always have whatever dialogue the Congress would like to have with us.

Chairman Hoekstra. Thank you.

Mr. Sever, would you be willing to participate in that or have somebody from the IBT?

Mr. Sever. I would, Mr. Chairman, in all due respect, I would like to confer with my personal people at the IBT and certainly we will get back to you.

Chairman Hoekstra. Okay. And certainly you will be getting a request for that meeting very soon.

I will yield to Mrs. Mink.

Mr. Mink. Thank you, Mr. Chairman.

I want to correct the record. There was never a discussion about a meeting to discuss alternatives. What I indicated to you in a closed meeting was that this was a problem that the Majority created and that this was a solution that the Majority would have to find.

I am certainly willing to sit in on any discussions that you have with the Justice Department or with the IBT or with anyone, but it seems to me quite clear what the Congress has to do in these circumstances and that is to allow the elections to go forward, make it possible for the funds that the Justice Department has uncovered, is available, make them available, and appropriate the additional funds required to have this election.

We are all interested in having a viable IBT come through a new series of elections, with elected officers that their members are entitled to have. And it seems to me to characterize our discussion as an unwillingness on the part of the Minority is a gross misstatement of our private conversation.

I feel that the action taken by the Congress last year was precipitous and premature. The courts have indicated in their observation that this is a continuation of the 1996 failed election and, accordingly, on an agreement which was entered into by the Bush administration as a consent decree, it is more than fair for the government now to step up to the plate and that includes the Congress and fulfill the obligation which was made not in this administration but in a prior administration.

Rightly or wrongly, it was decided not to proceed with the corruption and racketeering charges but to allow the people within the union to come to a full circle in the management and control of their own union, and the way to achieve it was through a monitored election.

Now the failure in the 1996 election is not a failure by the IBT, not a failure by its members certainly, a failure by a few individuals who it is now the responsibility of the government to uncover, to indict, to prosecute and send to jail or whatever.

But those circumstances are behind us. What we have to face as a Congress is this enormous, important union, allow it to move forward, allow it to have its elections and to do what we committed ourselves to do and what the court is now saying that we must.

As I understand, a plea for rehearing in this circuit is a very, very iffy, chancey enterprise. It requires a majority of the circuit judges to agree that this is a matter of such substantial interest which affects the uniformity of their decisions, and unless the majority of the circuit judges in this circuit agree, there will not be a rehearing. So we can't depend upon that.

And if we want to follow the schedule that has been outlined by the new election officer, it seems to me it is now our turn to come up to the plate and provide the money, if we truly believe in the union having the opportunity to have a fair election and its members to come to the democratic control.

There have been several inferences made that the IBT has not supported this process, having entered into the consent decree. We have information here, gathered from a variety of sources, and testimony made at the hearing today and other places, that indicate that the IBT, since the consent decree was entered into, has spent about $60 million for the enforcement and for their share of the cost of that consent decree.

And they are broken down in this way: Between 4 to $5 million each year since 1991 for the payment of the entire costs of the IRB, which I assume will continue in operation even after a successful election held this year. They are paying completely for the placement of this auditor to make a survey as to whether the expenditures are appropriate or not.

In the 1991 elections IBT paid for the entire costs of that election at the cost of $21 million. The 1996 election, the IBT paid $7 million.

So the record ought to clearly indicate that the IBT has paid its share for its self-monitoring, for its commitment to the consent decree, and all we want to do now, at least for the Minority side, is to complete this exercise and complete the 1996 failed election with this new election and fulfill the obligations that we made.

We said in 1991, IBT, you pay it all. If there is to be a monitored election in 1996, the Federal Government will pay for that. And that was the deal that was made. The failed election is a tragedy, really, for the members of this union. We all feel that it was something which placed the union as the victim. There were culprits involved, some of whom have pleaded guilty. But that is beside us now, it is behind.

What we have to do is make our commitment for the future, and that is the future viability and vigor of this union requires that we do everything possible to make this election come about. The IBT has performed, in my estimation, in accordance with the decree. They cannot be expected now, in keeping with their constitution and their obligation to defend the funds of the unions, the funds of the members of this union, negate what the court has said; which the court says they are not obligated to pay this money.

I think that it is beyond any requirement on the part of the IBT that they should come forward to pay for this rerun. If in the process of negotiations with this committee and with the Justice Department they come forward with an offer to pay, that is admirable; but I don't think that it is for us and for this Congress to overrule the courts in this circumstance.

So I plead with the Majority, include us in your discussions. If not, we will be hopeful that they come to fruition, because we are as anxious as anyone, particularly in view of the members who are suffering this situation and who are the victims, that this election be allowed to go forward and that the funds will be made available to the Justice Department to make it possible.

It is a small adjustor in the interests of democracy and the labor movement. This is the largest labor movement in the country. It deserves an opportunity to have a second chance, a new election. It deserves to have duly elected officers running this organization. And I hope that reason will take over and that the parties will get together and that we will be invited to the table.

Thank you.

Chairman Hoekstra. Thank you.

Mr. Norwood.

Mr. Norwood. Thank you very much, Mr. Chairman.

Mr. Colgate. I don't want to leave you out, and I am sorry that we have not had enough time together, but perhaps you could tell me: Martin Levy, the interim financial auditor, who is his boss?

Mr. Colgate. Because this hearing was focused on measures which could address paying for another election, I am not in a position to comment on that. It is just not_

Mr. Norwood. How about the folks behind you? Anybody back there know who his boss is? Who does he answer to?

Mr. Colgate. Counsel advises me he is working under the terms of the interim agreement.

Mr. Norwood. Uh-huh. So can counsel tell me who his boss is? Surely some authority is higher than Mr. Levy.

Mr. Colgate. With the Chairman's permission, if I could ask Jane Booth who has been assisting me in this endeavor to address this? Would that be_

Chairman Hoekstra. Fine.

Ms. Booth. My name is Jane Booth. I am chief of the Civil Division of the U.S. Attorney's Office in the Southern District of New York. Mr. Levy's--the letter from Mary Jo White sets forth Mr. Levy's responsibilities and duties. The term "boss" is not a term that actually fits the situation, but he is ultimately responsible to fulfill the terms of that agreement. We have had discussions with Mr. Levy, as Ms. White's letter indicates, and he has actually been in and talking with the union at the same time.

Mr. Norwood. So if he doesn't fulfill the interim agreement, who fires him?

Ms. Booth. Certainly if he did not fulfill the interim agreement, we would have a breach of contract action. It is an agreement between us and Mr. Levy, as far as I understand, and if Mr. Levy was not fulfilling the terms of the agreement, the government would be free to get a different independent financial auditor. And the independent financial auditor, just to be technical, is KPMG and not Mr. Levy, as I think Mr. Levy testified to this committee the last time that--the only time that he was here last month.

Mr. Norwood. Okay.

So it sounds like pretty clearly that Mr. Levy answers to the government.

Mr. Colgate, did you read in preparing for this hearing any of the testimony of Marvin Levy at our last hearing?

Mr. Colgate. No, I did not.

Mr. Norwood. Are you aware of how Martin Levy abused his duties and responsibilities under the interim agreement?

Mr. Colgate. This is an issue that I really have no knowledge about, sir.

Mr. Norwood. One issue, serious issue, that arose from the hearing, troubling, very troubling to this subcommittee, was the lack of authority on the part of IFA. Are any of you aware that, as Mr. Levy interprets his responsibility, he cannot question the business judgment of any IBT expenditure that comes across his desk?

Mr. Colgate. This is an area I am just not familiar. The first I became aware of this was this morning when I read Mary Jo's May 18th memo to the Chairman, or letter to the Chairman. I didn't even know that this was an issue--

Mr. Norwood. Could we ask the lady behind you?

Ms. Booth. My name is Ms. Booth. Or Jane Booth is fine.

I could say that it is true that he cannot question the wisdom of a particular business judgment. However, Mr. Levy never testified that there were any Lear jets being purchased by the IBT or that he saw any. Clearly if he saw a request for a Lear jet, he could say does this have a business purpose, which is a different question as to whether the IBT should spend their money on widgets versus tools or something.

But there is a difference between, as Ms. White sets forth in her letter if I remember correctly, looking at the wisdom of a business decision which is not the purpose of the independent financial auditor and the question, does it have a valid business purpose. So I just wanted for the committee to make those two points clear.

Mr. Norwood. Well, Ms. Booth, do you believe that a law firm for the IBT should be able to hire a PR firm and hide that expenditure by placing it on the legal bill and asserting attorney-client privileges as a defense of that disclosure? Is that okay?

Ms. Booth. I am not--I do know that the procedures in terms of the review of the IBT legal bills were set forth in Ms. White's letter, and we do agree that those procedures are adequate. However, if you notice at the end of Ms. White's letter, the procedures also indicate at the end, that if Mr. Levy has any questions about any particular expenditure, he has the right to go back and ask additional questions, as I indeed--I was not here when Mr. Levy testified, but I did see a C-Span of his testimony that was--

Mr. Norwood. Well, you probably noted, then, that he didn't think he had that authority. He just thought that--

Ms. Booth. That is not my understanding. My understanding is that Mr. Levy understands that he can go back and he can ask additional questions, if he needs to, about any particular expenditure on the legal side. My understanding is he has not felt the need to do that at this time.

Mr. Norwood. That is right, he hadn't asked one question. And Mr. Sever, rightly so, says "Well, we have Mr. Levy over here, who is supposed to be an auditor."

Ms. Booth. Mr. Norwood, I just want to make sure I don't--correct.. My understanding is that Mr. Levy and his staff, those auditors that Mr. Sever talked about asked questions quickly on a daily basis and have continually asked questions about particular expenditures and have gone back and asked questions and gotten the information. My understanding is at the end of the day, he has had all his questions answered, but that does not mean that those backup questions have not been asked. And I think that is set forth in my boss' letter, Mary Jo White's letter.

Mr. Norwood. Now he says he doesn't have the authority, for example, to see legal bills which is, of course, an expenditure.

Ms. Booth. The procedures set up between the IBT and Mr. Levy, the IFA, is set forth in our letter, as indeed it was in some April, I think we had another letter to the committee if I remember correctly. I just don't have the date. I wasn't prepared to say anything today. But my understanding is that that procedure fully sets out how the legal bills are being handled and that they are being handled in that way because of the attorney-client issues.

Mr. Norwood. Are you aware that the independent financial auditor does not even consider himself an auditor?

Ms. Booth. The term "independent financial auditor" is a term that does not probably comport with the technical terms. As I have since learned, auditors speak of themselves, the terms are very narrow. It was used colloquially to be the term to designate this independent financial auditor as somebody different from the independent administrator. But it was not meant to convey the term "auditor" in that narrow technical, I guess CPA term that I am not fully familiar with.

Mr. Norwood. Mr. Chairman, just a last comment?

Chairman Hoekstra. I find that hard to believe, but go ahead.

Mr. Norwood. Well, let me tell you that a lot of us who sat up here for 3 hours listening to Mr. Levy don't believe you have much of an interim agreement. I mean, even if you start out by saying this is an auditor, but he's really not an auditor, that is sort of confusing. Could you tell us when we could have a permanent agreement so we could have some faith that Mr. Levy will indeed try to make sure the next election--

Ms. Booth. I think the last paragraph or the penultimate paragraph of Ms. White's letter sets forth the answer to that question. And we are in discussions with the IBT right now to put in an agreement so that we can have interim internal controls looked at and to have those recommendations, binding recommendations, put into effect. It is that which we expect to have shortly. If that does not work, Ms. White says that we would then, it is our intention to seek court relief, but that is set forth on pages 4 and 5 of the letter.

Mr. Norwood. Which we just received. But could somebody explain to us when we will have a permanent agreement?

Ms. Booth. Shortly, is as best I can do, Mr. Norwood. We are in the midst of negotiations, and negotiations are difficult. We also at the same time--

Mr. Norwood. Who are you negotiating with?

Ms. Booth. We are negotiating with the IBT in terms of this, and we are concerned about the delay and risk for litigation. We didn't win the last time we went to court.

Chairman Hoekstra. It is a problem.

Mr. Norwood. Waiting on you, boss.

Chairman Hoekstra. I am waiting on myself.

To move forward on any of this, we need to get some of these answers, and before anybody even thinks about committing any more taxpayer dollars, you need answers to these questions; because if you don't have a financial auditor in place, you can't guarantee the taxpayers for the rank-and-file Teamsters that this election is going to be any different than the last one. And if you don't have the investigations of the people that are identified in the Jere Nash memo, if we don't have those investigations cleaned up and closed, there is not a whole lot that we can guarantee about this next election being any better than the last one.

Part of this whole process is not paying for the same thing a second time over. Part of the process is let's make sure that the next time we go through this effort, we get it done and get it done right.

Mr. Parker.

Mr. Parker. Thank you, Mr. Chairman. Mr. Chairman, I would suggest with all deference to all the panel members that we call the lady that just talked. I am sorry. I don't remember your name, because my God she understands, she is at least able to answer the questions a little bit better, and with all deference to everybody sitting at the table. I mean, I would like to hear what she has got to say. But besides that, there are a couple things I would like to clear up.

Mr. Sever, you gave $70,000 to the Carey campaign. It was all your personal money. There was no money coming from any other source that was funneled through you to go to the Carey campaign; is that correct.

Mr. Sever. None whatsoever.

Mr. Parker. All right.

Now you keep saying, and I am going come to this Jere Nash memo, you keep saying that everybody should be considered innocent until proven guilty. I agree with you. But you keep saying that you got an internal investigation that has been going on. What I want to know is--

Mr. Sever. Excuse me. I want to correct you, Congressman Parker. I didn't say I have an internal investigation.

Mr. Parker. So you have no internal investigation going on.

Mr. Sever. No. We are being investigated by outside government and so forth, and we are working with them in every step that we can supply information important to those investigations, and that is why I say--and I will repeat it one more time, as you agree that we all should be judged innocent until proven guilty.

Mr. Parker. But you are not doing an investigation yourself to see if any of these things occurred; is that right?

Mr. Sever. No, I am not.

Mr. Parker. And evidently you don't feel that is necessary.

Mr. Sever. I have confidence in a lot of people that are mentioned in this memorandum. I don't have confidence in Mr. Nash because he has already been indicted.

Mr. Parker. But you don't have an investigation going on.

Mr. Sever. No, I don't.

Mr. Parker. And don't plan on doing one.

Mr. Sever. Not in the immediate future.

Mr. Parker. Well, let me ask you a question.

Now my colleague from Virginia brought up this Keirnan letter in talking about specificity and not being so general. You were the secretary-treasurer of IBT?

Mr. Sever. Yes.

Mr. Parker. Controlling all the money.

You had a gentleman that you hired, paid him $250,000, and his name is Charles Ruff, Chuck Ruff. He in turn hired a guy named Jack Palladino, paid him $150,000. Can you tell me what they did, because you were talking about a quarter of a million dollars.

Mr. Sever. Yes.

My understanding from counsel is that is privileged information. You can take that up with counsel, and the appropriate measures will be dealt with.

Mr. Parker. I am not a lawyer or anything, and I realize a lot of things are privileged, but--

Mr. Sever. Well I am not a lawyer either, my good Congressman.

Mr. Parker. I am going to make--all right. I have all these lawyers running around back here, but let's try not to pay them any attention. They tell me that he can waive the privilege and so forth. He may want to, he may not. But what I would like, I mean you've got Teamsters out there that have paid this money, it is a quarter of a million dollars, and then he turns around and pays Chuck Ruff and he pays Jack Palladino $150,000.

It would seem to me that you could at least in general terms give an idea of what they did. That shouldn't be real secret. But any way, the point is that I would like for you to look at it and if you would like to claim, you know, a privilege as far as that, you know you can do that. But you have every right to waive that, since you paid them a quarter of a million dollars. Or that rank and file's money out there, I would think that they would want some answers too. But I would like that response from you.

Mr. Sever. Once again, I will take up your request with counsel, and you will get the appropriate response.

Mr. Parker. I appreciate that, and I am looking forward--

Mr. Sever. And let me suggest to you, Congressman, I care about our membership. That is why this International spent over $101 million through 1994 for out-of-work benefits for striking members of this institution that deserve the good contract, good health and welfare, and good care, and we took good care of our members, and we are going to continue to do so.

Mr. Parker. Well, Mr. Sever, let me say that I care about your members too, so you and I should get along real well, because I care about every dollar that they pay, I care about every dollar that has been misspent and that has been thrown away. And you might as well throw it down a rat hole, because that money, the fiduciary responsibility that you held as secretary-treasurer of the Teamsters and the responsibility that Carey held, somewhere along the line something went awry and that money was misspent, and the rank and file have a responsibility. You have a responsibility to them to let them know that it will never happen again and it will be corrected.

Mr. Sever. I understand that, and I have indicated in my opening statement we were the victim of embezzlement. Whenever all those appeals and everything are handled, there will be people that made such embezzlements will be found guilty, I am sure, and we will take the corrective measures.

Chairman Hoekstra. Mr. Sever, let me just end by saying this. Embezzlement must occur from within the organization, and if you don't have an investigation to find out what is going on and if you don't feel that it is responsibility to do it, then you are not upholding your responsibility to the membership.

Thank you Mr. Chairman.

Chairman Hoekstra. Mr. Sever, I found that I did highlight that in your opening statement, where you state that exactly: The IBT status is a victim of embezzlement. I guess that was the government's statement, and you used it and I think agreed with it. Who do you believe from the inside embezzled the funds?

Mr. Sever. I have no information, as I have indicated previously and several times here today, that all the allegations regarding this appropriation are being processed through legal channels, and they will continue to do so till all the bills are met and everyone gets their opportunity in court.

Chairman Hoekstra. My conclusion, and I appreciate you saying you are going to help us on the investigations. I get a little nervous when my colleague asks you a question and it becomes privileged, because if it is privileged and we can't find out about it and you are not doing an investigation, who is going to find out whether that $250,000 was spent appropriately or not?

Mr. Sever. Well--

Chairman Hoekstra. You are not sharing the information with us.

Mr. Sever. I have been glad to share information to you and your committee which is not privileged, and certainly I have the right, Mr. Chairman, as you do to have counsel advise you from time to time. I accept that counsel's advisement, and I would hope that you would share my acceptance of the same; but nevertheless, as I have indicated and I'll do it one more time, I will provide this committee and any investigative body, I will work with them in every way I possibly can to conclude their investigation and make certain that all the information necessary is available.

Chairman Hoekstra. I agree with you in that, you know, that you and I each have responsibilities in our jobs and you've got a responsibility to your Teamsters, I have got a responsibility to my constituents, my colleagues on this committee. My acceptance of your responsibilities and your claiming privilege would be a whole lot easier to take if through the morning you had told us that you, as acting President of the Teamsters, that you were running an aggressive investigation, independent of what we are doing, to get answers to some of those questions, but recognizing that you are not running an investigation and then that you are claiming privilege for those that are. I don't know who is going to go after those parts, and it really handicaps us in what we want to get done, but like I said, I would accept your claim a whole lot better if you told us, "Hey, there are certain areas we really got to go after ourselves and we've got to cover that and we are doing that," but that is not what you told us. You said, "We are not doing an internal investigation, we are letting other people do it," but then there's still information that you are not sharing with us, and that really makes it difficult for_

Mr. Sever. Well, Mr. Chairman, I am sorry, and I hope that I don't make it difficult for you or the committee, I am not trying to do that. But once again, you know, we have your committee requesting information; we are trying to conform to that. We have the government requesting information, the attorney's office, we have the Internal Review Board requesting information, and we are working with them in every respect to give them all the information. We have our staff. I have a staff working the weekends to make certain we get this. There's over 900,000 pages of documentation.

So we are making every effort to assist your committee and every investigative body to get this done, and we will continue to do so. But I hope you would respect that there's times that I need that privileged attorney-client counseling and I expect that I will be permitted to receive it, and that is all I am asking.

Chairman Hoekstra. You do have the right to exert privilege. It is also your prerogative to waive that privilege to allow the investigations that are ongoing to move forward as quickly as possible. I hope that one of the steps that we go through is that you will waive the privilege and you'll turn the tapes over as quickly as possible so that we can get that done and get that process moving forward.

Like I said, until we get answers to some of these questions and until I think the work of our committee is done, or at least has moved forward significantly in the work that we are doing with Mr. Cherkasky, I can't do a whole lot of work with Mary Jo White, because she can't tell us anything about what is going on. And she does that in a very nice way.

But you know we want the next election to go forward effectively and fairly and as quick as possible, but there are some barriers to that other step there. It is not just a matter of funding, it is not just coming up with the dollars to pay for it. There are other issues that need to be resolved before that takes place.

Mr. Norwood.

Mr. Norwood. Thank you, Mr. Chairman. And I know all of you will be delighted I will conclude with this, but I can't help, I can't leave this hearing--

Chairman Hoekstra. You promised us that once before.

Mr. Norwood. I mean it this time.

Mrs. Mink said earlier that it is our turn to come up to the plate. Well, what she really means by that is that it is the taxpayers' turn to come up to the plate again. She says that the Majority has created this problem because the Majority says that, you know, the taxpayers are a little upset. They paid out 20 million for an election that was thrown out, they paid out 20 million for supervision, or 22 million, whatever the amount is, and they are not so sure they want to pay again to run an election that is for a private union.

Now we have, and all agree, that there is an obligation on the part of the taxpayers to pay for supervision. I don't think anybody disagrees with that. There isn't any way or any stretch of anybody's imagination that can read the consent decree and say that the taxpayers are supposed to pay for conducting a private investigation. I don't care what your problems were, you can't read it into that. There is no way that the American taxpayers should have paid $10 million to conduct an election.

So I am very pleased to be part of the Majority that said, whoa, you know, we are going to learn from this. Maybe we are not so ready to pay for another rerun election. Maybe we shouldn't come up with another $10 million. Perhaps the responsibility of that should go to those who benefit from the election.

Now the implication here today has been that if the taxpayer doesn't pay, then of course we will never have a rerun. Well I don't believe that. I don't believe Mr. Sever wants that, I don't believe the taxpayer wants that. Of course we will have a rerun. But perhaps it is time for those who will benefit from a rerun to get new leadership into the Teamsters. Perhaps it is time for them to pay the bill.

There are other ways to pay for conducting an election other than asking the American people to do so. It is perfectly reasonable, it has some history to it that the Teamsters can make a loan from the AFL-CIO, the Teamsters can go to the rank and file, and I believe the Teamsters in my district would be delighted to pitch in 50 cents a month in order to have an election and let's get this behind us.

So I say again to you fellas, I believe we could go to the corner and make a deal. If we can have our 10 million back from conducting the 1996 election, I believe we could persuade Congress to let us pay for supervising the rerun election. That is all it boils down to, except when we do have the election there are those of us who are going to insist that there be very, very strict controls to see that this does not happen again, not just to the taxpayer, Mr. Chairman, but to the members of the Teamsters Union. We have nothing to brag about from the 1996 election, we have nothing we can be proud of about that, and we do need to move ahead. And I thank you for this hearing.

Mr. Sever. Mr. Chairman, if I could. I came from a family of 13. Nine of them are boys and four of them are girls. Seven have served the military, and I did myself, too. And I kept my word with the United States, and I think the United States ought to keep their word with the Teamsters. That word is, the courts have ruled to pay for an election.

Mr. Norwood. Mr. Chairman, if I could respond to Mr. Sever.

Chairman Hoekstra. Well, yes.

Mr. Norwood. Well, Mr. Sever, we have. We have kept our word. In fact, we went way beyond our word. We not only paid for supervision in `96, but we paid for what we didn't agree to, which was conducting the election.

There is nothing particularly in the interim agreement that would make one think anyone thought that there would have to be a rerun election. This is rather a new ball game, outside of the agreement, and what we are really saying is at least let's go 50/50, let's go back to the original agreement that the Teamsters had with the Justice Department when some months back there was an agreement that the taxpayer would pay for supervising 50 percent and you guys would pay for conducting.

So I am big on the government keeping its word, too. I think we don't do that near enough, and I certainly want us to, too, but we want you to work with us on this and ask your guys to pick up the part for conducting the election, that's all.

Chairman Hoekstra. Mr. Parker.

Mr. Parker. Mr. Colgate, they are talking about all of this stuff, as far as payments and what has been done. Did the taxpayers of this country pay part of the convention that the Teamsters had?

Mr. Colgate. They paid for a portion related, to my understanding, for the selection of delegates.

Mr. Parker. How much was that?

Mr. Norwood. Would the gentleman yield while they are discussing this? I think the subcommittee has been pleading with the Justice Department for months to show us how the $20 million was spent. I don't think we have seen it yet.

Mr. Parker. Okay.

Mr. Colgate. It's my understanding from counsel that we only paid for the portion of the election officers part of the convention.

Mr. Parker. Well, how much was that?

Mr. Colgate. I don't know. We could give you--I understand we have figures through December of `97, that we could provide those figures to the committee.

Mr. Parker. You have not provided those figures in the past?

Mr. Colgate. Counsel tells me that we have provided that information, through December of `97, I believe.

Chairman Hoekstra. If the gentleman will yield.

I believe we received some numbers on the cost of the election, and I think we were waiting for audited versions.

Mr. Parker. I understand the figure was around $5 million for the conducting part; not the oversight, but the conducting. Would that be a legitimate figure?

Mr. Colgate. I could ask Ms. Booth to answer. I don't have the details.

Ms. Booth. This budget, the new budget that was just submitted, 8.6, we are now presently reviewing it, and you would have to go back item by item through that.

My understanding is there had been a prior budget for the rerun that was somewhat less, and under that, there was a $3 or $4 million raise.

Mr. Parker. But I am talking about money we have already spent.

Ms. Booth. As to the `96, it has not been analyzed that particular way.

Mr. Parker. This is 1998, unless I missed a year someplace, and we have not analyzed that yet, and we do not have those figures.

Ms. Booth. We have analyzed the cost through December of 1977. The costs are not broken down in terms of conduct versus supervision, because the term "supervision" is, as construed by the court since the very beginning of this, a broad term to give the election officer the kind of authority that the election officer needed in the `91 election to broadly supervise the way the Chairman was talking about before, the entire election process. So the term "supervision" is a very broad term as developed by the courts.

Mr. Parker. Mr. Chairman, I would suggest that maybe we not only investigate the Teamsters, but we investigate the Department of Justice to figure out why they can't come up with a figure any sooner than that. I mean, to me, that's ridiculous. I am trying to choose my words very carefully, but it is stupid. It is incompetent not to be able to have those figures. And, I mean, even if you had it separated in different ways, I mean, it makes absolutely no sense. That's all I am going to say.

Chairman Hoekstra. I thank the gentleman.

I thank the witnesses for being here today. As I indicated, we are committed to working through a process to move this election forward, which includes the funding. It also includes taking the other steps that we believe are necessary to conduct a fair and honest election as quickly as possible.

The subcommittee will be adjourned.

[Whereupon, at 1:05 p.m., the subcommittee was adjourned.]