Bush’s union transparency rules retracted under Obama

Chuck Neubauer

The Obama administration promised increased transparency in government but has rolled back rules proposed by the Bush administration that expanded the financial disclosure statements required of labor unions and their leaders.

Since President Obama took office, the Labor Department has rescinded or delayed three sets of rules proposed by the George W. Bush administration that would have required unions and their leaders to more specifically detail their finances, according to a review of records by The Washington Times.

The rules were rolled back while the Obama administration was seeking more stringent regulation of corporate America, including banks, insurance companies, health care providers and publicly traded companies.

The proposed Bush rules would have required labor unions to identify from whom they were buying and selling assets, forced union leaders and employees to file more detailed conflict-of-interest forms, and required unions to reveal the finances of hundreds of so-called labor trusts – largely unregulated entities set up to provide benefits for members.

Former Labor Secretary Elaine L. Chao, one of the architects of the expanded Bush rules, said the Obama administration is “making a mockery of the regulations” and is giving “preferential treatment” to the unions.

“This administration is not enforcing laws on union transparency and democracy,” Ms. Chao told The Times. “They are telling unions that they don’t have to comply.”

A senior Republican on the House Education and Labor Committee has similar concerns.

Rep. John Kline of Minnesota, ranking member on the health, employment, labor and pensions subcommittee, asked Labor Secretary Hilda L. Solis in February why the Labor Department had rescinded rules designed to increase transparency in union finances. He said the rollback made it “more difficult for rank-and-file union workers to see how their dues are being spent.”

Mr. Kline said Mr. Obama had “made it a point on a number of occasions to talk about this administration wanting to be the most transparent and open administration in our nation’s history.”

Mrs. Solis told the congressman that transparency was the goal, but the department did not want to “overburden a system where information that was previously asked for may not be of much importance or significance.”

In an April 2009 report on Mrs. Solis’ first 100 days in office, the Labor Department said it was trying to “undo” or “temporarily suspend” Bush administration rules that “had a detrimental impact on workers.” The report said the expanded rules “made the union financial reporting requirements not only overly burdensome but ineffectual.”

To combat a “rush of rules out the door at the end of the previous administration,” the report said, Mrs. Solis had taken “significant steps to undo the most burdensome of these regulations and put in place an enforcement regime that will make union and management transparency a reality.”

White House spokesman Tommy Vietor declined to comment and referred inquiries to the Labor Department.

John Lund, the Labor Department’s deputy assistant secretary for labor-management standards, said a “fair and transparent government regulatory regime must consider and balance the interests of labor organizations, their members and the public.”

“Any change to a union’s record keeping, accounting and reporting practices must be based on a demonstrated and significant need for additional information, consideration of the burden associated with such reporting and any increased costs associated with reporting additional information,” he said.

Union officials said many of the expanded disclosures were unnecessary and accused the Bush administration of retaliating against labor unions for their support of Democrats.

Mrs. Chao described as “laughable” any union talk about how “onerous” it would be to comply with the expanded regulations. She said labor organizations repeatedly fought her on the added disclosures and it appeared “many labor leaders feel threatened by transparency.”

“What are they afraid of?” she asked.

LM-2 filings

In 2003, the Bush administration announced that the unions had to list on their LM-2 filings -annual reports disclosing union finances – any recipients of $5,000 or more in union funds. This included vendors, charities and political candidates, with specific amounts instead of lump-sum totals. These added disclosures, which took effect in 2004, were designed to shed light on where unions spent their money.

In the closing days of the Bush administration, the Labor Department sought to further increase the number of disclosures the unions had to make on the LM-2 forms. The new rules would have required unions to disclose the name of any party buying or selling union assets of $5,000 or more, making it easier for members to determine whether the transactions were at arm’s length. Unions currently need to list only the item and the sale or purchase price.

While unions for decades have been required to list salaries and expenses for each officer and employee by name, the expanded Bush rules would have demanded greater disclosure of benefits such as deferred compensation and union-provided housing.

The first filings under the Bush administration’s LM-2 rules would have been due later this year, but the Obama administration said in April 2009 that it wanted to delay implementation and formally withdrew the rules in October. The Office of Labor-Management Standards (OLMS), which enforces labor disclosure laws, said it withdrew the new rules because unions said the requirements were burdensome and the department felt it had not sufficiently reviewed the disclosure requirements added in 2003.

A review of LM-2 forms by The Times found disclosures that would not have been available on the filings prior to the Bush administration’s 2003 rule changes. For example, 14 national unions were listed as giving $3.2 million to a planning committee responsible for private funding for the 2008 Democratic National Convention in Denver.

The top donors, who gave more than $2.2 million, were the International Brotherhood of Electrical Workers (IBEW), the American Federation of State, County and Municipal Employees (AFSCME), the United Food and Commercial Workers International Union (UFCW), the Service Employees International Union (SEIU), and the International Brotherhood of Teamsters (IBT).

A check of the Labor Department database showed only one large donation to the 2008 Republican convention host committee – $50,000 from the SEIU.

The additional disclosures also helped expose the suspected misuse of funds. Tyrone Freeman, head of the largest union local in California, was forced out of office after the Los Angeles Times found that he had spent hundreds of thousands of dollars, including contracts to his wife’s video production firm and nearly $10,000 to a cigar bar, based in part on information from the LM-2 forms.

As a result, Mr. Freeman is under federal investigation and his former union, the United Long-Term Care Workers Union of the SEIU, has sued him for $1.1 million.

LM-30 filings

Last year, the Obama administration also backed off a rule requiring union officials and employees to file a more detailed version of the conflict-of-interest form known as the LM-30. The rule also would have forced more people – union shop stewards, in some cases – to file the forms.

The Labor Department requires the officials and employees to file the LM-30 statements if they receive any income or economic benefit from any entity that does business with the union or with an employer of union members.

Until Mrs. Chao cracked down in 2005, records show, few union leaders or employees bothered to file the form, although the filing requirement has been on the books for decades.

“There was no compliance and no enforcement,” Mrs. Chao said of the LM-30 filings.

In 2005, she said the department would start enforcing the rule with the 2004 reports and offered amnesty to first-time filers. As a result, filings were submitted by 13,326 union officials or employees, compared with 96 the previous year. Mrs Chao then updated the rule and expanded the form, which had been the same for 40 years, requiring more people to file and increasing the detail that had to be disclosed.

The new reports, covering 2008, were due in 2009.

But in 2009, the Labor Department backed off the new LM-30 filing requirement, saying the union leaders and employees could file the older, less-detailed version because of pending litigation and unanswered questions over the new reporting requirements.

The department said, “It would not be a good use of resources to bring enforcement actions” based on failing to file one version of the form over another. For now, union officials and employees can file either version of the form.

Mrs. Solis said at the February subcommittee hearing that the department was reviewing the expanded LM-30 form as proposed by the Bush administration. The Labor Department is expected to modify the rule.

T-1 filings

In February, the Obama administration also proposed rescinding a Bush plan to get annual financial disclosures from union trusts – organizations set up primarily to provide member benefits such as training and apprenticeship programs, building funds and strike funds.

Some of the trusts originally were known as “nickel funds” because employers would contribute 5 cents for every hour a union member worked. A number of the funds have grown to be multimillion-dollar enterprises as the amount of the contributions from employers has increased as part of collective bargaining agreements.

In December 2002, the Bush administration proposed a rule making the trusts file annual reports known as the T-1, similar to union reports detailing how much money they had and itemizing how they spent it. The AFL-CIO twice challenged the proposed rule in court, forcing the Labor Department to make changes and delay its implementation.

The first T-1 reports, covering 2009, were due at the end of March until the Obama Labor Department moved to rescind the rule.

“Basically, labor organizations file no financial reports on how these funds are spent,” said Mrs. Chao. “There is no accountability.”

The trusts have not been subject to any significant disclosure requirements other than having to file and make public their 990 federal income tax returns as nonprofits. Such tax returns often take years to become public and do not require details on how the money was spent.

For example, the UAW-Daimler Chrysler Skill Development and Training Program said in its 2006 tax return that it spent $16.3 million on sponsorships. It provided no details. The tax return does not show that much of that money was spent on NASCAR sponsorships of cars and a race, the UAW-Daimler Chrysler 400.

The program, now known as the UAW-Chrysler National Training Center, was one of three trust funds that the Big Three automakers operated jointly with the UAW, spending hundreds of millions of dollars with little transparency. The other two autoworker funds also spent millions of dollars without having to detail where that money went.

The Bush Labor Department estimated that 3,131 trusts would have to file T-1 forms under the new rules, detailing salaries as well as itemizing expenses of $10,000 or more.

In its proposal to rescind the T-1, the Obama administration said the required form was “overly broad and is not necessary.” Instead, the department proposed that the unions list the information on their annual LM-2 reports for their subsidiaries – entities that are “wholly owned, controlled and financed by a single union.”

“What we’re doing there is looking at obtaining that information, but placing it in a form we already require people to fill out,” Mrs. Solis said at the February hearing. “So it’s not as though we’re abrogating or trying to decrease or de-emphasize information. I think what we’re doing is … making it easier for people to report this information.”

But the finances of the autoworker training centers and some other trusts may not have to be reported under Mrs. Solis’ proposal.

Virginia lawyer Nathan Mehrens, who helped write the T-1 rules as a Bush Labor Department special assistant, said the UAW likely would not have to report the finances of the development and training program because it does not fit the definition of a union subsidiary.

He said it does not qualify because the union does not control the boards – half the board members are appointed by management.

“They are carving it up,” added Mrs. Chao. “The problem is their proposal only applies to union entities.”

Current Labor Department officials said they did not want to speculate on what organizations would have to file under the new plan while the rule-making process is under way.