by Carl Proper
Carl Proper
Money matters to unions. Financial resources are hard to obtain, easy to waste, and essential to union survival. Historically, the effort to accrue or protect a financial foundation has also caused many internal union conflicts, mergers and failures.
Capital’s obvious understanding of the power that derives from fiscal strength explains, among other realities, the persistent – and recently successful — efforts of labor’s corporate enemies to de-fund unions through blocking dues collection. Union leaders, unfortunately, are often untrained and unskilled in managing this critical resource, and may think it is inappropriate or unnecessary for them to learn. Through mismanagement of money, they may defeat the purpose for which they presumably became leaders in the first place – serving their members, or the working class.
This history recounts a struggle between two great and historically progressive unions over leadership, organizing jurisdiction (itself a form of property rights), and inherited financial resources. I focus here on financial issues, not because they were the core of the struggle, but because they are seldom discussed, and critical to labor’s history and future. I will also focus on the roles of labor leaders, who are the financial decision-makers, rather than on the rank and file. In later chapters, questions of leadership character, membership involvement and exploitation, and jurisdictional issues will get their due. One conclusion that I would reach, however, is that open discussion of money matters with union members produces better decisions than haste and secrecy.
The author claims no financial expertise, but over forty years as a member, staff member and consultant for the International Ladies’ Garment Workers’ Union (ILGWU) and its successors, UNITE and UNITE HERE, I observed and participated in a series of union mergers, disputes and breakups. All of these were motivated in significant degree by the desire to obtain, redirect or retain financial resources to accomplish personal or union purposes.1 Many of those resources, though sadly reduced by inter-union disputes and other poor choices, remain today.
I would urge unionists who believe the next revolution will be built without wealth to learn from our experience. The kinds of investments in real estate or banks made by the ILGWU or the Amalgamated Clothing Workers of America (ACWA) initiated decades ago, may now be more essential than ever. They can help unions withstand the loss of dues income in our day, and enable activities of community allies with little or no income base.
A recent paper by Rich Yeselson, “Fortress Unionism,” may offer a context for understanding the history that follows. Yeselson highlights the rejection by the auto industry in 1946 of UAW demands for a voice in management, as well as the passage in 1948 of the anti-union Taft-Hartley Act as turning points in U.S. labor’s subsequent decline. While Yeselson does not need to say it, income-producing wealth and a voice in managing it are the fundamental bases for power in capitalist society. The ILGWU and ACWA (later ACTWU) each achieved a degree of co-management in the industries where they organized. The ACWA founded and owned a Bank that loaned money to industry management, among others. The ILGWU regulated relations between union manufacturers and contractors, through secondary boycott rights retained as exceptions to Taft-Hartley. Control of the ILGWU and ACWA wealth was an objective in the struggle between UNITE HERE and SEIU.
“Fortress unionism” is also relevant because a key player in the Progressive War, New England Joint Board Manager Warren Pepicelli, has long subscribed to the Fortress view, that worksite-by-worksite organizing will never restore U.S. labor to its former glory; and the responsibility of the current generation is to preserve a legacy of labor power for the eventual day when the workers of America rise again. This approach worked well for his affiliate in relation not only to employers, but in internal union disputes.
…
Around the turn of the 20th century, composer Richard Wagner wrote a series of operas in which ancient Germanic gods and heroes fought over the magic wealth of the Rhine Gold. That story ended with destruction of the dangerous wealth. The story has been retold in our time as the tale of furry-footed British hobbits. As in the original, the power of the ring had to be destroyed to save innocent souls.
But innocence is no virtue for labor leaders. And the destruction or loss of wealth hurts members and limits organizing.
In the story that follows, the “gold” accumulated by earlier generations is the object of sometimes brutal struggle. Leaders who carelessly waste, lightly give away, or fail to share resources in time of need place their own and their members’ interests at risk. Those who deploy wealth with courage and wisdom often fare better.
We need to learn from the past, in a time when we cannot afford to repeat its errors.
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Andrew Stern, John Wilhelm, Bruce Raynor surround Jesse Jackson at 2004 founding Convention of UNITE HERE.
In 2004, two private-sector unions with strong organizing reputations merged to form a single organization, UNITE HERE. UNITE! (the Union of Needletrades, Industrial and Textile Employees) was the product of earlier mergers, which had brought the ILGWU, the Amalgamated Clothing Workers’ of America (ACWA), Textile Workers of America (TWUA) and several smaller unions together. HERE (Hotel Employees / Restaurant Employees International Union), founded in the 1890s, represented workers mainly in the hotel, food service and casino industries. As its first President, UNITE HERE chose former UNITE President Bruce Raynor, earlier a TWUA and ACWA Education Director and Organizer.
At an intense moment in the secession (2008-2009) from UNITE HERE, led by Raynor, of most former needle trades affiliates, mediator John Hansen, President of the United Food and Commercial Workers’ Union, wrote that “bothsideswentintothe (original merger) agreementwiththeireyeswideopen.” This paper points to some exceptions to that assertion. Sadly, shortsightedness has been as common as wisdom and solidarity in the series of mergers and breakups that led to today’s smaller (but growing) UNITE HERE and the still smaller Workers’ United division of SEIU. As regards the breaking apart of UNITE HERE and the consequent redistribution of that wealth, it is surprising how many union leaders were surprised at the outcome
Roads to growth and division
Beginning in the 1920s and 1930s, both the ILGWU and ACWA, battling to empower impoverished immigrant communities and workers, separately learned the value of money, managed it carefully, and eventually created reservoirs of wealth that attracted merger suitors in decades to come.
In 1926, nearly bankrupt after a mismanaged strike, ILGWU Treasurer and then President David Dubinsky was forced to borrow from members and from sympathetic Jewish financiers to put the union back on its feet. From that time forward, the ILGWU developed a reputation for underpaying staff, providing tiny (but fully funded) pensions to members, and growing funds and investments like a successful investment house.2
Initially on firmer financial ground in 1923, visionary ACWA President Sidney Hillman saw the opportunity to strengthen labor by lending to unions, union members and union companies. In its early years, the fully union-owned Amalgamated Bank was carefully managed and grew steadily, aiding clothing and other workers through financing cooperative housing, managing pension and health funds – and providing bonding or bail money for trade union and other activists. The union was relatively financially strong in other areas as well.
Clothing / Textile Merger
In 1975, the Textile Workers’ Union of America (TWUA), in the midst of a decades-long struggle to organize the giant J.P. Stevens textile empire, approached for a merger the union that had helped found TWUA in the 1930’s. Understanding that Clothing Workers’ financing would be the key to completing the members’ victory, TWUA President Sol Stetin set ego aside, agreeing to take the third leadership spot in a merged union. ACTWU was born, and the JP Stevens win was just the beginning of its organizing success.
By the 1990s, however, ACTWU’s finances at the national level were stretched thin, and the union’s financially strongest local affiliates declined to bail out their own International. Looking for speedy gains, the Amalgamated Bank, in parallel with many New York capitalists, moved into risky derivative investments, and eventually paid a high price like other speculators.
It was now ACTWU’s turn to bid for a merger with a financially stronger organization, the ILGWU.
ILGWU – ACTWU merger
As befitted a cautious and wealthy union, ILGWU President Jay Mazur explored the merger possibility in discussions over several years with ACTWU President Jack Sheinkman. Formal planning, beginning a year ahead of the actual merger in 1995, was inclusive, with a committee of twelve a second committee of top officers meeting regularly to work through the issues. Merger leaders sent a draft constitution to all affiliates six months in advance of the merger Convention, and national leaders discussed their proposals in meetings with regional affiliates around the country.
Everyone understood that the ILGWU’s jurisdictional base, mostly employed in tiny women’s garment factories, was disappearing overseas and losing out at home to reinvigorated sweatshop competition. But the ILGWU International union owned union buildings in New York and Pennsylvania valued at around $250 million.3 Its benefit accounts were overfunded, and resources in general were professionally well managed by Secretary-Treasurer Irwin Solomon, Mazur and a financially skilled team. The union also managed several “knippels”4 of liquid resources – an Organizing and Strike Fund (estimated at $20 million), an Affiliates Assistance Fund, and several Union Label and Promotion Funds.
President Mazur, approaching retirement, wanted to see the union’s wealth channeled to organizing and growth. ACTWU, based in larger and more technically advanced menswear and textile factories, seemed a good match; it was in a related industry, and a relatively known quantity. The merger was a potential match of money – centralized in the ILGWU national office — with a larger ACTWU membership, both current and potential. But the ILGWU, its wealth placing it in the drivers’ seat, was careful to negotiate protection for its interests.
The final agreement merged UNITE leadership nationally, promoted integration of staff and affiliates, stipulated that the ILGWU President would become the first UNITE President, that merger parties would “use their best efforts” to retain a President from the ILGWU and roughly equal numbers of Vice Presidents from the two unions for the first six years. Providing a buffer for ILGWU resources, the merger would function as more of a limited partnership than a unified organization. Alongside the merged leadership, each union would also continue to exist separately, with its own officers, properties and General Executive Board (GEB), for the time necessary for establishing the merger.
Instability at the Amalgamated Bank was a concern. This led to a mediated decision by just-retired AFL-CIO President Lane Kirkland in the month before the founding Convention, clarifying that neither side was responsible for the debts of the other. Either side could leave the merger at will, and take its property with it, by a two-thirds vote of its own GEB.
The merger succeeded initially as an organizing vehicle, winning major campaigns in the southern textile industry, and accreting laundry unions at a national level. After the International union purchased $23 million worth of shares in the troubled Amalgamated Bank, enough to control 51%, the Bank also returned to strength, opening its first non-New York branches in Washington, DC, New Jersey and California.
Near breakup of UNITE merger
But three years into the merger, when a figure who would disrupt the labor movement for years to come, Executive Vice President and then Secretary-Treasurer Bruce Raynor, moved to oust Mazur and take over union leadership, the merged union was on the verge of breaking apart. As part of Raynor’s attack, New York’s Chinatown-based Local 23-25, formerly Mazur’s Local and now headed by Executive Vice President Edgar Romney, was investigated for Trusteeship, at Raynor’s initiative, charged with putting its financial interests ahead of the interests of the members’.
Responding to Raynor’s move, the ILGWU GEB exercised the “opt-out” provision of the Constitution, voting by a two-thirds majority to end the merger, taking all ILGWU property with them. With funds and real estate – vital for organizing and everyday union business – at risk, Raynor and his allies from the former ACTWU, had to surrender.
In its “opt-out” vote, however, the ILGWU Board had also authorized President Mazur to negotiate a settlement with the former ACTWU if he could. Many on the ILGWU Board believed, at a minimum, that Raynor should be barred from office. But Mazur had seen Raynor from early days of the merger as his most likely and qualified successor, commenting that, “Bruce Raynor’s a son-of-a-bitch, but he’s not going to give away the union.”5 Still trusting in Raynor’s organizing skills, he offered Raynor and Executive VP Ed Clark a fourteen- point settlement, halting disruption for the duration of the six-year period. They signed and then complied.
Shortly after reaching the settlement, by way of extra protection, the still-functioning ILGWU Board voted to return a number of International-controlled buildings to regional ILGWU affiliates. These included an eight-story Boston building managed by the New England Joint Board, where I had served on the staff before (and again after) moving up to the national office. Together with another $25 million redistributed from the Affiliates Assistance Fund, these former ILGWU affiliates were made relatively self-sufficient going forward. The union’s most valuable property, the 28-story, block-long building at 275 Seventh Avenue in Manhattan, which housed the Union Health Center along with paying tenants, was an exception. With an estimated value of $100 million, “275” remained under ILGWU ownership, and under day-to-day control of Local 23-25 Manager and Executive VP Edgar Romney. Following the buildings decision, it was clear that if Raynor eventually gained control of the union, he would not automatically control the property as well.
Mazur was peacefully re-elected as UNITE President at the 1999 Convention, and retired as President on June 30, 2001, with Raynor then moving into the top slot.
The ILGWU had managed its financial inheritance with care, directed it toward growth of a new labor movement, and passed a strong organization on to its 21st century successor.
Alliances, Divisions and Issues in the Raynor UNITE Presidency
Shortly after assuming power in mid-2001, Raynor requested that affiliates transfer ownership of their buildings back to the International Union, under his control. In a fateful meeting of the still-functioning ILGWU GEB, former ILGWU leaders faced a choice that tested their strength and foresight. The decisions made by two of those affiliates greatly affected their powers in the ensuing decade.
The big, affable and well-liked number two leader, now-Secretary-Treasurer Edgar Romney, trustingly passed his $100 million inheritance6 at 275 Seventh Avenue over to the new President’s control.
The New England Joint Board, headed by recently elected Manager Warren Pepicelli, made a different choice. The Joint Board had acquired an eight-story building in Boston’s Chinatown in 1948 (now worth around $10 million), and occupied it ever since, while renting out other space to tenants. The building rent – together with stock the union had purchased in the Amalgamated Bank, and a smaller account in the nationally-managed “pooled investment fund” – was an important supplement to members’ dues. Pepicelli (and some other leaders), with their eyes wide open, declined to hand over their buildingsto the new President. In a separate vote, Pepicelli – not tipped off in advance that his colleagues had already decided to give 275 Seventh Ave. to the International – also voted against that decision.
Romney and Pepicelli then lived with the consequences of their vote. Romney, from that point forward, had the President’s support, while Pepicelli never came off the shitlist. But Pepicelli retained the property and a degree of independence. Romney occupied a building owned by the International union, and was in a position, going forward, where it would be very difficult to say “no” to a strong President.
Pepicelli was a fighter, and a careful manager. In younger days, as shop Steward in an IBEW factory, he had led a challenge to management that led to his dismissal, until the members responded by shutting down production. He still liked to recall the plant owner calling him back to work and parading him around the floor, so that union members would see him and get back to work. Now, inheriting the ILGWU legacy in New England, including the Harrison Ave. building, he felt a sense of obligation to protect that inheritance at any cost, and eventually pass a strong and independent organization on to his successor.
In the near term, placing the President’s good will ahead of property was an advantage to Romney, who became Secretary-Treasurer of UNITE. Later, during the 2008-9 breakup of UNITE HERE, and the formation of Workers United as a division of SEIU, Raynor briefly made Romney the first President of that union. Pepicelli, by contrast, immediately upon assuming New England leadership, saw all of his International-paid Organizers pulled away. Later, following the 2004 merger of UNITE with HERE, he faced unrelenting pressure from the International Union to merge his self-sufficient affiliate with the bankrupt Boston Local 26, a former HERE affiliate Raynor was courting with his own re-election in mind. With encouragement from the International, the former HERE affiliate moved into the 33 Harrison Ave. building and paid no rent for a period of years.
Pepicelli, however, was able to maintain substantial membership without the Organizers, and built a solid membership base as he and his staff negotiated good contracts and prioritized settling members’ grievances. With the advice of his trusted friend and Treasurer Sam Giurleo, he closed unneeded regional buildings, reduced staff, kept dues at an affordable level, and retained the Joint Board’s independence.
…
Raynor proved a careless, impulsive and divisive President and a poor money manager.
Shortly after gaining control of UNITE,Raynor sold the former headquarters of the ILGWU, a six-story building on Broadway north of Times Square, formerly world headquarters for the Ford Motor Company, for $23 million. The following year, the new owners sold it for twice the price. The original Amalgamated Bank building in Union Square was also sold, along with the Pocono workers’ resort, Unity House, started by the ILGWU in the 1920s, and some other properties.
Not long after assuming the Presidency in mid-2001, Raynor alienated a critical constituency, ILGWU staff retirees, by cutting the life insurance they had long counted on (in lieu of higher wages), from accumulated amounts often in excess of $100,000 to $15,000. After hearing complaints, he cut the maximum again to $5,000. Besides raising the question whether a union employer should emulate a pernicious corporate pattern, this decision placed at long-term risk an eventual $30 million reversion to the union from the over-endowed Death Benefit Fund. (For a retiree reaction to these cuts, see long quotation at footnote (16).
The Raynor administration invariably characterized the building sales, benefit reductions and other financial raids as needed to raise money for organizing. In broad terms, however, while the UNITE merger was initially successful in organizing southern textile plants and accreting a significant industrial laundry sector, growth through organizing in manufacturing sectors could barely slow membership losses. The newly-organized textile mills soon followed the garment industry out of business or out of the USA. Major and expensive campaigns to organize clothing firms Guess? and Peerless, and later the industrial laundry conglomerate Cintas, came to nothing. As early as 2003, the pattern of selling resources to finance ongoing operations led Edgar Romney to warn UNITE’s executive board that “we cannot continue to deficit spend and reduce our assets.”7
Management waste notwithstanding, UNITE continued to attract outside interest just like the 1995 ILGWU. UNITE was still a Rhine Gold repository, but with dwindling membership and organizing jurisdictional “rights” mostly in dying industries. To remain a factor in the labor movement, UNITE needed to merge into a service sector.
UNITE HERE Merger
The Hotel Employees / Restaurant Employees International Union – HERE – founded in the 1890’s, had developed a reputation under President John Wilhelm for never surrendering in an organizing fight, even if that meant picketing for months or years. The union operated in non-exportable jurisdictions – hotels, casinos and food service – that fit the times; and focused strategically on building dense membership in major cities, largely ignoring other areas. While steadily adding numbers and raising standards for member earnings and militance, they now stood where ACTWU once had stood – needing to merge for money. While a few affiliates controlled some wealth, many were dependent on an International office that was itself short on the cash needed to grow.
HERE President, John Wilhelm, had first come to public attention as he led the organization of Yale staff while still a student there. In 2003 HERE had joined with UNITE, and several other organizing-driven unions in forming a New Unity Partnership intended to reform the AFL-CIO. Both UNITE and HERE represented immigrants primarily, and had jointly led the 2003 Immigrant Workers Freedom Ride. As a “getting to know you” joint action with HERE, busloads of UNITE members had joined HERE’s successful Yale picket line in New Haven a year before their merger.
A significant difference between the two unions was that, like ACTWU before it and in contrast to the ILGWU and UNITE, HERE operated with decentralized wealth and control.
As 2004 approached, once again a union with great organizing commitment sought merger with a union with strong finances and a dying jurisdiction. And, as in the ILGWU-ACTWU merger, the union with the money would control the initial process.
Steps leading to the 2004 merger and draft constitution, however, were the opposite of the 1995 ILGWU-led process. In contrast to the year-long open discussion within both unions of the prospective merger, the first UNITE HERE Constitution was drawn up in secret discussions between the two Presidents only. Raynor largely dictated the terms, explaining that “we’re not going to get into a lot of debate and discussion about the merger. We’re just going to merge.”8 In an interview six months before the merger Convention, even UNITE Executive VP Ed Clark acknowledged that “I have no inside knowledge of how the merger between HERE and UNITE came about, or how the merger document that people are going to vote on in July looks.”9 Nearly every delegate, Vice Presidents like Pepicelli included, saw the governing document they were to vote on for the first time at the merger Convention.
Despite his near-total control, Raynor failed to negotiate any protections for his team or himself — the kind of “pre-nuptial agreement” the ILGWU had demanded and later used to its advantage. His intention was to focus on the former HERE jurisdictions, leaders and employers, winning their favor and bringing those of his former allies who could do the same along with him. Though he would now sit where President Jay Mazur had sat before him, atop a membership majority committed to its own leaders, he expected to win them over as he had earlier won significant ILGWU support from leaders seeing him as the voice of the future. Though UNITE had been “married” for its money, as the ILGWU had been, Raynor was confident he could earn HERE’s love and respect, and took no precautions on behalf of himself or other former UNITE staff and members.
The Raynor-drafted Constitution, ratified with very little discussion at the merger Convention, granted extraordinary powers to two Presidents – a radical contrast with the former HERE structure based on strong regional leaders.
As in the ILGWU-ACTWU merger, the opening advantage lay with the wealthier team. In addition to leading health and pension fund Boards, Raynor chaired the UNITE-dominated Board managing 275 Seventh Avenue, and sat as President of the Amalgamated Bank. Hospitality Division President John Wilhelm and three other former HERE officers served as a minority with 16 former UNITE leaders, including close Raynor ally and former UNITE Organizing Director Mark Fleischman, on the Amalgamated Bank Board. Raynor loyalist Edgar Romney led the ILGWU Death Benefit Fund.
Observers with a memory of previous merger battles should have understood that control of these assets would shift to the team with the most votes after the second Convention. Many on the UNITE side, however, expected that Raynor would protect their interests, and were stunned a few years later when much of their legacy did change hands.
As in earlier combinations, money from the UNITE HERE merger quickly led to organizing success in key jurisdictions, including victory in a long-fought Atlantic City strike, and wins in hotels across the country. Organizing-focused industry “Conferences” were formed for Gaming and for Hotels, but there was no Conference for the former UNITE jurisdictions of manufacturing, distribution and laundries until near the end of Raynor’s administration.10
In some regions of the country, the merger proceeded smoothly. Former UNITE Vice Presidents, including David Melman in Pennsylvania and Noel Beasley in Chicago, successfully formed and led Joint Boards that included both former UNITE and former HERE Locals. The same was true in some HERE-led areas. In other areas, however, cultural differences between the two merger partners were never resolved. President Raynor, in particular, proved unable to win the allegiance of key Vice Presidents from the former HERE – a reality he did not fully understand until late in his term of office. His top-down constitutional structure and unwanted interference in union- employer relations left him as isolated as first UNITE President Jay Mazur’s lame-duck status had once left him.
Secession from UNITE HERE
BEST OF FRIENDS – UNITE VP Clayola Brown, John Sweeney, Bruce Raynor, Edgar Romney (from behind) at Yale strike, New Haven, 2003)
In the Fall of 2008, less than a year before the July Convention where general officers would be elected, three key and financially independent Vice Presidents from the former HERE – D Taylor, head of the iconic “Culinary” Local 226 in Las Vegas (and future President of UNITE HERE), powerful New York Local 1 Manager Peter Ward and Los Angeles leader Mike Casey -met with Raynor. They informed him he did not have their support, and in all probability would not be re-elected. His override of HERE traditions, beginning with the top-down constitution, and followed by repeated Presidential interference in local negotiations, had left him without support from the majority faction of the union.
The foolhardy failure to add “opt-out” language to the constitution in the event of irreconcilable differences now left many former UNITE leaders, like Raynor himself, in a desperate position. Rather than seeking a negotiated solution, Raynor proposed secession from the union without any Constitutional basis. But the original UNITE merger objectives were not abandoned. The UNITE side would gamble, using union resources, to wrest both the former HERE’s hotel / casino jurisdiction and the financial assets UNITE had brought to the merger from the union to whom they now belonged. With such a dowry, another union would be glad to welcome Raynor and whomever he brought with him into a new merger.
This meant war.
The decision to secede, which risked the resources on which members’ security depended, was made with no discussion with the members.
Seeing no alternative to Raynor’s leadership, the former UNITE General Executive Board went along with his risky plan, though not without some debate. By January of 2009, however, Pepicelli’s New England Joint Board was the only holdout. As a GEB member, and Board member on the Health and Pension funds, Pepicelli participated in all early planning meetings, but voiced doubts about the legality of the secession, and made no recommendation as to which way his affiliate should jump.
In late 2008, secession battle plans were summarized by Raynor Special Assistant Keith Mestrich in a one-page “Major Goals” document. Component 2 was “Retain Control of Key Assets,” identified as:
Amalgamated Bank of New York
National Retirement Fund (which owned the Amalgamated Life Insurance Company – ALICO)
Staff retirement Fund (co-owner of ALICO)
National Health Fund
275 Seventh Avenue, the union headquarters building (Pres. Wilhelm also maintained a headquarters in Washington, DC)
Death Benefit Fund
Not listed as assets, but also involved as weapons in the struggle were what remained from other ILGWU “knippels11,” including the Strike Fund and Affiliates Assistance Fund, as well as the “Pooled Investment Fund” managed by the International union on behalf of many affiliates. An investigation by the Public Review Board, originally created to watch out for corruption in the pre-Wilhelm HERE, found that around this time, Raynor had arranged to move $12 million in cash and more than $3 million in other assets from the union’s main account to locals loyal to him.12
The stated objective of all these actions was: “[O]ther side realizes that when they wake up in control of the union on July 3, 2009 (post-Election day at the Convention) that they in fact have won nothing – no assets to control.”
The “other side” was the union formed in the previous Convention – UNITE HERE.13
Merger with the Service Employees International Union (SEIU), headed by Raynor friend and ally Andrew Stern, was not included in the opening discussion, but was probably in Raynor’s mind, and on everyone’s agenda by the end of the first month of the ensuing war.
War strategy depended on surprise, haste, bold misstatement of facts, UNITE-side solidarity, a weak UNITE HERE response, and a quick victory – no assets for UNITE HERE to control.
Raiding the Funds
The former UNITE’s public moves to “retain control of assets” began with stunning unanimousUNITE-side votes at the December 6 meeting of the Amalgamated Bank Board. These put in place “Amended and Restated” bylaws. The new rules replaced the annual election of Directors with three levels of staggered terms (“a common tactic for warding off challenges to Boards,” according to the Pensions and Investments website)14; replaced majority voting with a 75% supermajority requirement for “significant transactions, or to call a special shareholders meeting; and replaced nomination of Directors by the whole Board with a new, five-person “Nominating Committee” including only UNITE-side Directors. The nominally neutral and professional bank President, Derrick Cephas, supported the UNITE-side majority15.
The immediate effect of the revised Bylaws was to disempower the UNITE HERE Board minority, and facilitate their eventual replacement. On January 22, 2009, remaining democratic pretenses were dropped, and co-President John Wilhelm and his assistant Matthew Walker were simply voted off the Board.
In addition to opening to political abuse an institution that, when well-managed, had been of extraordinary value to the labor movement, the new rules also amounted, in the words of Joann S. Lublin of the Wall Street Journal, to “corporate-governance practices that [the Amalgamated Bank Board] has opposed as an activist investor in other companies.”16 Rather than protecting investors, the new structure simply empowered Board members to the potential detriment of the Bank.
The struggle for control of the “Rhine Gold” was under way.
Despite the Board changes, majority bank ownership still rested with UNITE.
In succeeding months, the UNITE side was able, through various ruses, to shift majority Bank ownership to its side.17 These mainly involved arranging purchases of Bank stock by UNITE-side-controlled Funds, including the member and staff Retirement Funds, and the Pooled Investment Fund. In addition, in 2010 the Bank issued $70 million in new stock, which also tended to dilute the shares held by UNITE HERE affiliates. Fund regulators raised questions as to whether the bank stock purchases were being made in the interest of the Funds – as required by law – or of the Bank and Bank management, but the shift was accomplished.
Following the Bank Board coup, similar votes were taken by UNITE-side majorities for the union’s merged retirement fund, health fund, staff pension fund, and the corporation managing the building at 275 Seventh Avenue.18 Because the members’ retirement fund and the health fund were regulated “Taft-Hartley” entities, with the union and employers each holding half the seats on the governing Boards, there were limits on what changes could be made. In addition, Warren Pepicelli and other UNITE HERE Directors retained their seats on the pension boards during the war, and up to the present day, resulting in some cooperation between the two unions on behalf of the membership. President Raynor’s influence over the employer members, however, was sufficient for the UNITE side to amend the rules to allow Board participation on the nominally UNITE HERE funds by officers of affiliates seceding from the union.
As for the all-ILGWU / UNITE Death Benefit Fund, to obtain initial UNITE-side control, it was only necessary to amend the Trust Agreement to allow non-UNITE HERE members – soon to be the entire governing Board — to serve on the ruling council. That control was soon effectively challenged, however, by a group of former ILGWU retirees.
ThisFund for former ILGWU members and staff, it was estimated, would retain a value from $30-$50 million after the last beneficiary collected. While most of the former ILGWU was now affiliated with Workers United / SEIU, the Retired Officers of The ILGWU, an organization chaired by former member and later New Jersey Manager of the union, Manny Leventhal, was a bitter enemy of Bruce Raynor. As UNITE President, he had cut their long-promised life insurance from over $100,000 in many cases to $5,000 – and refused even to meet with them to discuss it.
On October 20, 2009, a day before returning to their former 275 Seventh office, the Retired Officers filed a lawsuit19 asking that control of the Death Benefit Fund revert to UNITE HERE. By way of explanation, they released a passionate eight-page open letter to the labor movement and the media.20 In it, they detailed Raynor’s mistreatment of retirees, along with other instances of malfeasance as they saw it. The broadside included an interview with a recent widow, whose ILGWU husband had learned virtually on his deathbed that the inheritance he had long promised to his family was now reduced to less than the costs of burial. In May of 2010, the Staff Retirees organization formally left Workers United and affiliated with UNITE HERE.
UNITE-side / Workers United moves to win control of what was probably the most valuable physical asset of either union, the building at 275 Seventh Avenue, soon became part of a much larger lawsuit involving UNITE HERE and the secessionist group.21
As noted earlier, Edgar Romney, as UNITE Executive Vice President, had agreed in 2001 to turn ownership of the former ILGWU building over to UNITE. It had then become property of the UNITE HERE International union as part of the 2004 merger. There was no managing Board, just a single “member,” UNITE HERE.
Nothing daunted, on December 8, 2008, agents for Raynor’s faction filed “Restated” Articles of Organization for the building corporation, creating a managing Board with Raynor and five other UNITE-side allies as “Managers.” The building office was relocated to West 34th St., from which it would be managed on a daily basis by UNITE-affiliated National Corporate Research, L