[Senate Hearing 108-313]
[From the U.S. Government Publishing Office]




                                                        S. Hrg. 108-313

  TEACHERS UNION SCANDALS: CLOSING THE GAPS IN UNION MEMBER PROTECTION

=======================================================================

                                HEARING

                               BEFORE THE

                    COMMITTEE ON HEALTH, EDUCATION,
                          LABOR, AND PENSIONS
                          UNITED STATES SENATE

                      ONE HUNDRED EIGHTH CONGRESS

                             FIRST SESSION

                                   ON

EXAMINING TEACHER UNION SCANDALS, FOCUSING ON CLOSING THE GAPS IN UNION 
   MEMBER PROTECTIONS, THE DEPARTMENT OF LABOR'S ADMINISTRATION AND 
   ENFORCEMENT OF THE LABOR-MANAGEMENT REPORTING AND DISCLOSURE ACT 
(LANDRUM-GRIFFIN ACT), AND CERTAIN INVESTIGATIVE MATTERS INVOLVING THE 
       WASHINGTON TEACHERS UNION AND THE UNITED TEACHERS OF DADE

                               __________

                             JUNE 19, 2003

                               __________

 Printed for the use of the Committee on Health, Education, Labor, and 
                                Pensions


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                            WASHINGTON : 2003
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          COMMITTEE ON HEALTH, EDUCATION, LABOR, AND PENSIONS

                  JUDD GREGG, New Hampshire, Chairman

BILL FRIST, Tennessee                EDWARD M. KENNEDY, Massachusetts
MICHAEL B. ENZI, Wyoming             CHRISTOPHER J. DODD, Connecticut
LAMAR ALEXANDER, Tennessee           TOM HARKIN, Iowa
CHRISTOPHER S. BOND, Missouri        BARBARA A. MIKULSKI, Maryland
MIKE DeWINE, Ohio                    JAMES M. JEFFORDS (I), Vermont
PAT ROBERTS, Kansas                  JEFF BINGAMAN, New Mexico
JEFF SESSIONS, Alabama               PATTY MURRAY, Washington
JOHN ENSIGN, Nevada                  JACK REED, Rhode Island
LINDSEY O. GRAHAM, South Carolina    JOHN EDWARDS, North Carolina
JOHN W. WARNER, Virginia             HILLARY RODHAM CLINTON, New York

                  Sharon R. Soderstrom, Staff Director

      J. Michael Myers, Minority Staff Director and Chief Counsel

                                  (ii)

  




                            C O N T E N T S

                               __________

                               STATEMENTS

                        THURSDAY, JUNE 19, 2003

                                                                   Page
Gregg, Hon. Judd, a U.S. Senator from the State of New Hampshire.     1
Kennedy, Hon. Edward M., a U.S. Senator from the State of 
  Massachusetts..................................................     3
Yud, Lary F., Deputy Director, Office of Labor-Management 
  Standards, Employment Standards Administration, U.S. Department 
  of Labor, Washington, DC.......................................     4
Feldman, Sandra, President, American Federation of Teachers, 
  Washington, DC; Thomas Donahue, senior fellow, Work In America 
  Institute, and former Secretary-Treasurer, AFL-CIO, Washington, 
  DC; and Damaris Daugherty, founder, Teachers' Rights Advocacy 
  Coalition, Miami, FL...........................................    18

                          ADDITIONAL MATERIAL

Statements, articles, publications, letters, etc.:
    Lary F. Yud..................................................    36
    Sandra Feldman...............................................    38
    Tom Donahue..................................................    41
    Damaris Daugherty............................................    43
    Roland Ashby-Rier and Alfred Hubbard.........................    47

                                 (iii)

  

 
  TEACHERS UNION SCANDALS: CLOSING THE GAPS IN UNION MEMBER PROTECTION

                              ----------                              


                        THURSDAY, JUNE 19, 2003

                                       U.S. Senate,
       Committee on Health, Education, Labor, and Pensions,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 10:15 a.m., in 
room SD-430, Dirksen Senate Office Building, Senator Gregg 
(chairman of the committee) presiding.
    Present: Senators Gregg, Alexander, Bond, Kennedy, Dodd, 
and Clinton.

                   Opening Statement of Senator Gregg

    The Chairman. I will open the hearing. I understand Senator 
Kennedy may be on his way, and when he gets here, of course, we 
will recognize him for an opening statement if he decides to 
proceed in that manner.
    This hearing today is an investigation into two scandals 
that have called into question some of our Nation's basic 
worker protections. Money earned by thousands of hard-working 
public school teachers in Washington, DC and in Miami, FL was 
squandered and used to fund extravagant lifestyles for a few 
officials of the unions which were supposed to protect those 
workers. No one knew this until it was too late.
    We first became aware of the problem when the story broke 
last fall that an enormous and unauthorized amount of money was 
being spent and withdrawn from the paychecks of Washington 
teachers, paid union dues, and further investigation showed 
that much of that money was being misallocated to benefit a few 
people who worked for the Washington union.
    Further investigation by the FBI and the United States 
Department of Labor, with the full cooperation and hard effort 
of the American Federation of Teachers, uncovered upward of $5 
million in alleged embezzlement. And now, we have learned that 
the teachers in Miami may be victims of the same sort of 
corruption.
    These stories of exploitation are inexcusable. We need to 
find out the answers and then what we need to do to make sure 
it does not happen again.
    The witnesses appearing before us today are here to help us 
understand what happened. I am sorry to say that our pursuit of 
the truth is not being welcomed in all quarters. Unfortunately, 
one individual is not able to come forward today because of 
legitimate fears for his safety and the safety of his family.
    Some of today's witnesses may come under unfair scrutiny or 
have their motives questioned, perhaps as a distraction from 
the real scandal before us today. All this is regrettable, but 
the American people need to know the answers, and I am 
committed to pursuing those answers.
    Our hearing today is intended as a systematic and sober 
appraisal of these questions: How have public school teachers 
been affected by the alleged embezzlement of millions of 
dollars in dues money, and what do they have to say about it? 
Why did the United States Department of Labor not do more to 
uncover the fraud and stop it at a much earlier stage? What if 
any local and national union safeguards were in place? Did they 
work? If they did not work, why didn't they work? And what 
changes need to be implemented?
    With all the media attention on transparency and 
accountability in this post-Enron period, how did these local 
unions avoid public scrutiny until it was too late?
    Are the scandals in Washington and Miami aberrations, or 
could they potentially be the tip of a bigger problem?
    And, most important, we here in Congress must ask how are 
we going to use the answers to these questions to ensure that 
such massive misappropriation of union money never happens 
again?
    I just want to outline some of the things that have been 
alleged to have occurred here. In the Washington Teachers Union 
scandal, the president of the union is alleged to have spent 
over $1 million on goods and services to benefit herself. For 
example, $500,000 in custom-made clothing was purchased from a 
fancy clothier in Baltimore; $150,000 from Neiman Marcus; 
$57,000 for 288 pieces of Tiffany sterling silver; $50,000 for 
Snazzy Limited in Orange Park, FL; $50,000 at Nordstrom; 
$40,000 at Saks--and the list goes on and on. That was with the 
president.
    The treasurer of that union is alleged to have charged over 
$100,000 on the credit card of the union for purchases which 
were suspect and primarily personal use.
    The chauffeur of the president--which in and of itself 
seems strange--is also alleged to have been actively involved 
in the misappropriation of union funds, with a salary that is 
believed to be $150,000 paid through the union but maybe not 
reported.
    There are other union officials who were relatives--for 
example, the sister of the president, or assistants to the 
president--who also are accused of having misappropriated 
significant dollars to benefit themselves, dollars which were 
obviously supposed to be used to help the teachers who were 
represented by that union either with their health care or with 
their pensions or with their simple representation in making 
sure they were adequately protected as they pursued their jobs.
    In the Miami situation, the head of the union, whose salary 
included $42,000 a year, which was put into an account for 
which there appears to be absolutely no accountability, took a 
number of vacations which were highly suspect and charged them 
to the union. For example, $50,000 was spent on a 3-week 
vacation, it appears, in California, Australia, and New 
Zealand, and $20,000 was spent on a vacation in Biscayne Bay, 
and all of those charges were paid for by the Union, including 
innumerable others.
    Clearly, there is a problem here. This hearing is about 
what that problem is, how it was identified, and what we need 
to do to make sure that we have in place safeguards so that 
this type of misappropriation of union dues does not occur in 
the future.
    I will yield now to Senator Kennedy.

                  Opening Statement of Senator Kennedy

    Senator Kennedy. Thank you, Mr. Chairman.
    All of us know the many, many contributions that unions 
have made to workers across the countries and the immense 
difference that they have made in the lives of working 
families. They have led the effort in every major improvement 
in workers' lives over the past century, for higher pay for 
overtime, for minimum wage, for safe workplaces, for good 
health plans and good pension plans. Janitors have health 
insurance for their families. Factory workers who never 
finished high school send their children to college.
    The American Federation of Teachers was indispensable in 
promoting education reform long before it achieved the momentum 
it has today. The AFT has always put children's learning, high 
standards, and education reform first, as we know from their 
leadership on Head Start, No Child Left Behind and improving 
teacher education.
    The landmark Federal statute that safeguards union members' 
rights was enacted by Congress in 1959 with union support. That 
act was meant to help unions fulfill their duties, not hobble 
them.
    As the legislative history of the Senate bill clearly 
stated, a strong, independent labor movement is a vital part of 
American institutions. The Senate should be careful neither to 
undermine self-government within the labor movement nor to 
weaken unions in their role as the bargaining representatives 
of employees.
    The vast majority of labor union offices and employees 
abide by these laws and use their high office to improve the 
lives and working conditions of all Americans. Incidents of 
wrongdoing are very rare. Twenty thousand labor organizations 
filed reports with the Department of Labor. Each of these 
unions has anywhere from a few to a few thousand offices and 
employees. Hundreds of thousands of employees have access to 
union funds, but financial crimes are extremely rare.
    There is no question that what happened at the Washington 
Teachers Union and Union Teachers of Dade was reprehensible, 
particularly when it comes at the expense of the education of 
our children. The responsible officers betrayed their office 
and their trust, and by doing so, they harmed unions, their 
members, and the public trust.
    The AFT has taken immediate and proactive steps to prevent 
abuses in the future, and it is tightening controls throughout 
their affiliate structure to ensure direct reporting to 
individual union members. But that is far from enough for this 
anti-union administration.
    Last December, the Department of Labor proposed drastic 
changes in the financial reports that labor unions filed with 
the Federal Government, including the extensive itemization of 
all payments that meet a threshold amount which the Department 
proposes to set as low as $2,000 and requires voluminous 
schedules that could be hundreds of pages long, listing every 
possible last transaction.
    Union members want and they deserve genuine transparency. 
They do not want a blizzard of information that would be a 
mockery of real reform. It is the same, old anti-union bias. 
Newt Gingrich called for similar changes in the first Bush 
Administration. He even went so far as to send a letter to 
Secretary of Labor Lynn Martin calling for these changes, as he 
put it, ``to weaken our opponents and encourage our allies.''
    Now the administration wants detailed reports of union 
expenses for all political activities and for union organizing, 
too. They want detailed information about the number of union 
members in each category. It is absurd to pretend that these 
requests are supposed to benefit union members; the are 
intended to aid union-breakers. It fails to protect union 
members' money, but it still imposes millions of dollars in new 
administrative costs on unions. The goal is to force unions to 
wallow in red tape instead of providing valuable services for 
their members, such as seeking better wages, better benefits, 
and better working conditions. It has nothing to do with 
helping union members understand how their dues are being 
spent.
    The Department of Labor wants to hold unions to a far 
higher and unreasonable standard than the administration's 
friends in the corporate world. In fact, only 10 percent of all 
corporations have any government financial disclosure reporting 
requirements at all, and these corporations are not being asked 
to open their corporate ledgers, to itemize each of their 
transactions--and this after all of the scandals that we have 
seen recently.
    The Department is asking unions to reveal their key 
strategies, to report when and to whom each payment is made. We 
would never ask a corporation to reveal such trade secrets.
    It is difficult to believe that even the most anti-worker, 
anti-labor, anti-union Congress or administration would 
seriously try to force such blatant change in the law. They 
would never dream of imposing such a request on corporations, 
and they should not try to impose it on unions, either.
    Thank you, Mr. Chairman.
    The Chairman. Thank you, Senator Kennedy.
    We are joined as our first witness by Larry Yud, deputy 
director, Office of Labor-Management Standards, Employment 
Standards Administration, United States Department of Labor.
    I notice that Mr. Yud has worked for the Department of 
Labor for 36 years. That is very impressive. That means, I 
think, six different Presidents, or maybe even seven that you 
have worked under. That sort of commitment to public service is 
extraordinary, and we appreciate it, and we look forward to 
hearing your thoughts on this issue.

  STATEMENT OF LARY F. YUD, DEPUTY DIRECTOR, OFFICE OF LABOR-
MANAGEMENT STANDARDS, EMPLOYMENT STANDARDS ADMINISTRATION, U.S. 
              DEPARTMENT OF LABOR, WASHINGTON, DC

    Mr. Yud. Thank you, Mr. Chairman.
    Mr. Chairman and members of the committee, I am pleased to 
appear before the committee today to discuss the Department's 
administration and enforcement of the Labor-Management 
Reporting and Disclosure Act, also known as the Landrum-Griffin 
Act or the LMRDA.
    I understand that the committee is interested in particular 
in matters involving the Washington Teachers Union and the 
United Teachers of Dade. As the committee is aware, the 
Washington Teachers Union is the subject of an investigation 
under the auspices of the United States Attorney for the 
District of Columbia, and my agency, the Office of Labor-
Management Standards, is actively involved in this 
investigation.
    In view of the pending investigation, it would be 
inappropriate for me to discuss specific issues concerning that 
case. At this time, my agency is not involved in any 
investigation involving the United Teachers of Dade.
    Although I cannot discuss the current case involving the 
Washington Teachers Union, I can provide a general overview of 
the LMRDA, which is centered on two fundamental goals--
promoting union democracy and ensuring union financial 
integrity.
    The rights of union members and important union 
responsibilities are set forth in five titles of the LMRDA. In 
my written statement, I summarize each of these five titles, 
but I will confine my remarks today to the two titles I think 
may be most relevant here.
    Title II of the LMRDA requires reports from unions, union 
officers and employees, employers, labor relations consultants, 
and surety companies. The Department of Labor has authority to 
enforce these reporting requirements, and the LMRDA provides 
for the public disclosure of those reports.
    Over the past year, the Department has taken a number of 
important steps to improve the administration of the LMRDA 
reporting requirements. In January of 2002, we began 
distributing to labor organizations a free CD-ROM containing a 
computer software program that they can use to electronically 
complete the financial reports they are required to file. Those 
reports can now be submitted over the Internet.
    In June of 2002, we began making these annual financial 
reports, and more recently the reports of employers and labor 
relations consultants, available for public disclosure on the 
Internet. Since the activation of the Internet site in June of 
2002, there have been half a million visits to the homepage of 
that site.
    In December of 2002, the Department published a Notice of 
Proposed Rulemaking to substantially revise the Form LM-2, 
which is the annual reporting form used by the largest union, 
and to revise, although less significantly, Forms LM-3 and LM-4 
which are used by smaller unions. Approximately 20 percent of 
all unions are required to file the LM-2 report.
    The new forms will provide union members, Congress, and 
other interested parties with more information about the 
financial activities of unions, including information about 
trusts operated for the benefit of the members. These reporting 
improvements will give union members the information they need 
to engage in effective self-governance, and the enhanced detail 
and disclosure will also discourage financial mismanagement and 
embezzlement.
    The Department is currently reviewing the comments received 
on its Notice of Proposed Rulemaking.
    Under Title V of the LMRDA, financial safeguards are 
established for unions. Title V imposes financial 
responsibilities on labor union officials. A union officer or 
employee who embezzles or otherwise misappropriates union funds 
or assets commits a Federal crime that is punishable by fine or 
imprisonment.
    Title V establishes bonding requirements for union officers 
and employees and prohibits persons convicted of certain crimes 
from holding union office or employment for up to 13 years 
after their conviction.
    In the last 5 fiscal year, our agency has conducted 750 
election investigations and supervised 173 union elections. We 
have invested 75 trusteeship cases and conducted nearly 2,000 
criminal investigations primarily involving embezzlement of 
union assets and related reporting violations.
    During this period, the Department's investigative efforts 
resulted in 72 criminal indictments and 639 convictions, or 
approximately 11 convictions per month.
    In addition to these enforcement activities, OLMS carries 
out extensive programs of compliance assistance, beginning with 
offers of assistance to all officers of newly-formed unions. We 
publish a wide variety of compliance assistance materials, and 
every OLMS field office has an active program of compliance 
assistance seminars. Much of the focus of this compliance 
assistance is on the statutory reporting requirements.
    Unfortunately, because of the significant decline in staff 
resources, the agency has had to significantly curtail its 
discretionary program to audit local and international unions, 
and instead, we have had to focus on mandatory activities such 
as election investigations and criminal referrals.
    The agency implemented a compliance audit program in the 
early 1980's following a recommendation by the General 
Accounting Office that was critical of the agency for not 
conducting sufficient onsite reviews directed to enforcement of 
the LMRDA. However, between 1990 and 2002, the agency's staff 
resources have declined nearly 40 percent, leaving us with 
insufficient resources to manage an effective audit program.
    Mr. Chairman, I can sum up in about a minute, if that is 
okay.
    The Chairman. Take whatever time you need.
    Mr. Yud. Thank you, sir.
    I was commenting on the fact that we have not been able to 
do the number of audits that we have been able to do in the 
past. As an example, the Washington DC district office of our 
agency, which is responsible for nearly 1,500 reporting labor 
organizations in Maryland, Virginia, and the District of 
Columbia, is able to conduct only about three audits a year. 
The agency's program to audit international unions has suffered 
a similar fate. Over the last 5 years, we have been able to 
audit on average only one national or international union a 
year. The audit program is 20 years old, and we still have not 
audited 10 of the 25 largest unions.
    When we are able to conduct an audit, our investigators and 
auditors perform a number of mandatory and optional steps 
designed to protect even well-disguised misappropriation of 
funds. In the case of one large international union, an OLMS 
audit uncovered an embezzlement of over $350,000 that for many 
years had gone undetected by the union's own external auditor.
    On a bright note, the President and Congress have begun to 
rectify this lack of effective oversight. In the recently-
enacted fiscal year 2003 budget, OLMS was authorized to 
increase its staff. That increase will enable us to begin to 
build back our audit program as well as to increase the 
compliance assistance activities that we carry out to help 
union officers, employees, and members understand the law and 
take steps to place themselves into compliance.
    Thank you for giving me the opportunity to discuss this 
important program. I would be pleased to answer your questions 
subject only to the constraints by which the Department feels 
bound in light of the pending investigation.
    [The prepared statement of Mr. Yud may be found in 
additional material.]
    The Chairman. Thank you, Mr. Yud.
    Picking up where you left off, you said your funding has 
declined 40 percent. Is that since 1992?
    Mr. Yud. I think that is from 1990, sir.
    The Chairman. And what would you need in order to 
adequately fund the agency, this function of the agency, over 
what you are presently getting?
    Mr. Yud. We have in the President's fiscal year 2004 budget 
a request for 75 FTE, and I think that brings us up to a level 
where we can reasonably carry out a fairly effective audit 
program, oversight program.
    The Chairman. So if you got this year's administration 
budget request, you think you could restore your auditing 
capability considerably?
    Mr. Yud. Yes, sir. I do not think that any person involved 
in enforcement in the Federal Government feels they have enough 
resources to do the complete job they would like to do. But the 
President had asked for 75 more positions for us, and I think 
we believe that that would allow us to carry out a much more 
effective audit program--as well as other related programs.
    The Chairman. You said that there were only three audits 
done in the greater Washington are out of those firms which, as 
I understand it, means the chance of being audited is about 
once every 500 years, which means we would have to go back to 
Charlemagne before we got a complete audit; is that correct?
    Mr. Yud. I think that is the way those numbers work out, 
yes, sir.
    The Chairman. And since the initiation of your program, you 
have only been able to audit 10 of the 25 largest unions; is 
that correct?
    Mr. Yud. No, sir. What I meant to say if I did not was that 
if you rank unions by size, 10 of the 25 largest have never 
been audited by our agency even though the law has been around 
for over 40 years, and our audit program has been around for 20 
years.
    The Chairman. Is that a function of resources?
    Mr. Yud. Yes, sir.
    The Chairman. Also, I am wondering--of course, most of your 
teachers' locals are not private unions--they are public sector 
unions--so they are not subject to your reporting requirements, 
are they?
    Mr. Yud. That is correct. Teacher unions would only report 
to us if they had some private sector members or were somehow 
covered Federally.
    The Chairman. So as a practical matter, you would not have 
been logically stepping into the Miami teachers union for an 
audit even if you had the resources, because they would not be 
subject to your jurisdiction?
    Mr. Yud. That is correct. I would add one thing. It is a 
question of resources and demands. For example, when we get an 
election complaint, the statute requires us to investigate it 
within a specific time period. So it is a question of do you 
have the resources and discretion to use them on a program like 
an audit program, or are you required with the resources you 
have to commit them to mandatory work.
    The Chairman. Now, there has been some representation by 
some commentators that the better approach here rather than 
setting up your reporting requirements system that you have put 
in place is to have unions subject to independent financial 
audits. What are your thoughts on that--full reporting versus 
independent audits or as a complementary exercise to 
independent audits?
    Mr. Yud. Mr. Chairman, I guess I would respond to that by 
saying first that a major objective of the LMRDA is 
transparency, is to give union members the information they 
need to understand how their union is being operated and to 
evaluate how their dues are being spent.
    Audits are a fine thing, but an audit basically tells 
somebody that maybe the checkbook is balanced correctly and the 
amounts reported in assets and liabilities and so on are 
properly reported. It really does not tell you much of anything 
about how that organization is being operated, particularly 
when you have very large aggregate amounts, in the millions. It 
may not tell you that $100,000 is being spent at this 
restaurant or really how the money is being used.
    So I do not think that an audit in and of itself 
accomplishes the goals of--it certainly does not accomplish the 
goals of disclosure, and it really does not necessarily provide 
the transparency that I think the statute calls for.
    The Chairman. You are sort of the SEC of the--what the SEC 
does to stockholders and shareholders and investors, you do for 
labor union members; right?
    Mr. Yud. I think that is apt.
    The Chairman. What would be your recommendation--obviously, 
there are a lot of recommendations out there in the post-Enron 
climate as to what we should be doing with investors and 
shareholders--what would you your recommendation that we should 
do in light of these instances that we have seen with these two 
specific locals having had their funds mismanaged? Do you have 
specific recommendations that are either legislative or 
regulatory--besides more resources, which is obvious.
    Mr. Yud. Well, I think we are actively involved in two 
efforts right now. One is our Notice of Proposed Rulemaking, 
which is to change the reporting forms to have them provide 
more information, more detailed information, information which 
I think is more valuable and useful by union members so they 
can engage in more effective self-governance so it is much more 
difficult to misappropriate or misuse funds if you have to 
account more specifically for how you spend that money. I mean, 
if you are going to be spending money at Neiman Marcus or 
Snazzy Limited or places like that, and that has to be 
disclosed somehow, then it is very likely that more people will 
ask questions, rather than if that amount is in an account 
which says $5 million was spent on office expenses or something 
like that.
    So I think it is time to change and improve the reporting 
forms so they are more useful for self-governance by the union 
members themselves. Obviously, the Department of Labor is 
responsible for engaging in oversight. I think that that calls 
for a certain number of audits, with the possibility that an 
audit will be conducted at some point in time, and I think that 
is a very important program. So I would respond in that 
fashion. As far as other legislative changes, I did not come 
here today prepared to talk about those legislative changes.
    The Chairman. Thank you.
    Senator Kennedy?
    Senator Kennedy. Thank you, Mr. Chairman.
    Obviously, none of us holds a brief for the kind of 
corruption that has been identified in these instances that we 
have talked about this morning or in terms of the corporations 
of this country as well. And of course, we are all mindful of 
the fact that at least in the one case, this matter was all 
brought up by the members of the union itself--not in the 
second case, but certainly in the one case. And as I mentioned 
at the opening, it is even more horrific when you think that 
they are diverting funds from training teachers or from trying 
to improve the quality of education in this country.
    I am interested in your views about the reporting 
standards. You mentioned that you can do about one out of 140 
audits. I guess that is about the same that you have in terms 
of inspections on OSHA for health and safety as well. It may be 
slightly different, but not greatly different.
    So certainly, whatever we are going to do here, we want to 
make sure that we are trying to do what needs to be done in 
terms of both the problems of the accountability and reporting 
as well as, it seems to me, the protection of workers.
    But let me ask you on the question of the reporting--first 
of all, I want to pay tribute to you, Mr. Yud. You have had a 
remarkable career, and we want to thank you so much for your 
service.
    Mr. Yud. Thank you.
    Senator Kennedy. We really appreciate it. I think all of us 
are mindful of your long and distinguished career.
    The Chairman. You are catching up with Senator Kennedy.
    Senator Kennedy. You cannot resist, can you? [Laughter.] 
Now, getting past that--and I have just used up half my time--
you testified that the Department of Labor is substantially 
revising the LM Form, but in the previous years before a House 
Committee, you said that ``The LM-2 report sets forth in proper 
detail a reflection of the financial status of the union.'' In 
fact, you said that three times in response to direct 
questioning by Congressman Hoekstra, that you believed that the 
form set forth a clear picture of the financial conditions of 
labor unions. And you stated before a congressional committee 
that ``The existing reporting form provides an actual 
reflection of a union's financial status,'' yet today you have 
a different view.
    Can you tell us what changed your mind?
    Mr. Yud. Thank you, Senator, and thank you for your kind 
comment.
    I think that the form itself is an aggregate statement. 
Principally, what the form has on it now are aggregate 
statements about totals--total assets, total liabilities, and 
so on. And insofar as that is more or less like a balance 
statement, I think the form probably adequately does that.
    What the form does not do is give people the detail that 
they really need to get behind those figures, to understand, 
all right, if this many million was spent in a particular area, 
some detail about how that money was used.
    Senator Kennedy. You are talking about millions, but of 
course, in the recommendation of the regulations, it is down to 
$2,000, and there has been the observation that you may very 
well find out that there is such a massive amount of incidental 
information that it is not going to provide the kind of 
transparency, and that what you really need, as I imagine and 
as we have seen with the Sarbanes bill, is appropriate 
accountability--for corporations, in terms of how they are 
dealing with the trust that they have, as well as for unions 
and the trust that they have.
    Wouldn't you agree that that is not an unreasonable 
position? Are you bothered at all by the kind of minutiae and 
detail as I understand that these current regulatory proposals 
provide? What you have just outlined here seems to me to make 
some sense, but in just a preliminary review of those rules and 
regulations, they seem to be quite a bit different.
    Mr. Yud. Well, we are in the middle of Notice of Proposed 
Rulemaking. We did receive nearly 36,000 comments. We are 
reviewing those. A lot of them go to issues of burden and 
relative burden on smaller organizations as opposed to large 
organizations, and we are very actively reviewing those 
comments, and we have to make some critical decisions in those 
areas.
    I do think there has been a little bit--maybe a lot--of 
exaggeration about what the impact of some of these 
requirements really is. It is possible that the smaller unions 
in the LM-2 category--which I think you are referring to--if 
you have $200,000 a year in disbursements, and you only itemize 
over $2,000 or $5,000, which is the range we have been looking 
at, the likelihood is that there will be very few items that 
will have to be itemized in that detail; especially if you pull 
out a couple of salaries that are $50,000 or so, you are just 
not going to be left with that many items.
    Senator Kennedy. What I am hearing from you is that there 
ought to be an effective auditing process that makes available 
information to members so that there can be an effort toward 
self-policing as well as the protection of the funds in a 
reasonable way for the union members. As I understand it, that 
is different from what has been proposed in these other kinds 
of forms.
    Finally, in response to Congressman Hoekstra, I believe 2 
years ago, when you were asked about the various forms, you 
said, ``Well, you are partially correct, yes. The Department at 
the time does not have any proposed changes to make. We think 
that those reports set forth in proper detail a reflection of 
the financial status of the union.''
    That is why I was asking the question. You said that 
``these report set forth in proper detail a reflection of the 
financial status of the union,'' and today, you are talking 
about a rather dramatic alteration--or maybe it is not so 
dramatic. I am just trying to understand exactly why this had 
``in proper detail a reflection of the financial status,'' and 
you now think that so much more information is necessary.
    Mr. Yud. Well, again, as I said, I think when you talk 
about the status--which is generally are you in the black or 
are you in the red, what is the size of your assets--those 
forms can do that. Whether that is enough to tell you how the 
union is really being operated and where the moneys are really 
going, I do not think the current forms do that.
    Senator Kennedy. Finally, the Department's proposed 
regulations may require unions to itemize expenses that may be 
as low as $2,000 across a broad range of categories, including 
core tasks that unions perform for their members such as 
organizing, lobbying, and political activities.
    Publicly-traded corporations are not required to list every 
expense over $2,000. They are not required to itemize expenses 
that reveal the workings of their core operations. I say what 
is sauce for the goose is sauce for the gander. Shouldn't we be 
asking the corporations to do the same thing?
    Mr. Yud. Senator Kennedy, we are dealing with different 
laws here. We are dealing in one case with union members, with 
their dues going to the union, and in the other case, we are 
dealing with corporations and stockholder investments and what-
have-you.
    Senator Kennedy. Retirement accounts, life savings.
    Mr. Yud. Yes, sir. But I think they are subject to somewhat 
different considerations and certainly different laws. From my 
point of view, corporations--and I am not an expert; I do not 
understand the SEC--but I believe that corporations have very 
extensive reporting responsibilities. They have to report not 
only annually--many have to report quarterly; they have to 
provide not only quantitative material information, but they 
have to provide qualitative information. And it seems to me 
that most corporations would require a staff of attorneys and 
financial consultants and CPAs and what-have-you to prepare 
those reports.
    I think what we are looking at on the union side is a 
little different approach, and I think most of the reports that 
we are talking about under the LMRDA can be prepared by a 
bookkeeper or an accountant.
    Senator Kennedy. The only point, as I said, is that even 
with those reporting, we have our Enrons and Worldcoms and the 
kind of damage that has been done to the lifetime savings of 
workers. We have reports and reports. What I hear you 
testifying to is what can be effective in trying to reveal if 
there is going to be any degree of corruption, something that 
can be transparent in terms of the members, and I imagine 
toward the stockholders, so we are able to blow the whistle on 
both. I think that certainly ought to be our objective.
    Thank you, Mr. Chairman.
    The Chairman. Thank you.
    Senator Alexander?
    Senator Alexander. I will give most of my time back so I 
can hear the other testimony, but from listening to Senator 
Kennedy--do you know, Mr. Yud, whether in the District of 
Columbia, you are required to join the teachers union in order 
to teach?
    Mr. Yud. I am sorry to say that I do not know that.
    Senator Alexander. I believe in many parts of the country, 
at least where there is not a right-to-work law in order to 
teach, that it is necessary to join the union and pay the dues. 
I was thinking about the comparison between corporations and 
unions, and I was trying to think of a corporation that anyone 
was required to join or required to invest in, and I could not.
    Can you think of a corporation in which anyone is required 
to invest their money in?
    Mr. Yud. No, sir, I cannot.
    Senator Alexander. I cannot, either, and it would seem to 
me, therefore, that particularly in those states or 
jurisdictions where, in order to teach, one might have to pay 
dues that were $500, $600, $700, or $800 a year, it might be 
important to have more stringent requirements about disclosure 
so that people who are compelled to pay their dollars would 
know how the dollars are spent. And while I do agree that 
teaching and unions are distinct and unique, if we are reaching 
for analogies, maybe a more comparable analogy would be 
campaign contributions. We do have in our country a system 
where no one is required to give a contribution to Senator 
Gregg or to me or to Senator Kennedy or to Senator Dodd, but if 
one does, then there are some very extensive requirements that 
we have imposed upon ourselves and our whole process about who 
gave the money and how it is spent, in some significant more 
detail than the proposal for the reporting on union 
requirements, and the whole rationale for that is that people 
would then know who gave the money and how it was spent, and 
they could come to their own judgments about whether it was 
properly done or properly spent.
    So I am not so sure that the analogy between corporations 
and unions in this case is a good one. I think a better one 
might be campaign contributions, and probably the best one 
would be let us just look at these circumstances in the 
teachers union.
    I look forward to the other testimony, and I appreciate 
yours.
    Mr. Yud. Thank you.
    The Chairman. Senator Clinton?
    Senator Clinton. Thank you, Mr. Chairman.
    I just wanted to make two preliminary remarks. First, I 
thank you for holding this hearing. I think it is our first 
hearing on education and labor matters this year, and I hope we 
will have more hearings on issues like no child left behind and 
special ed and Head Start and some of the other concerns that 
certainly my constituents are talking to me about on a regular 
basis.
    Second, I think that our hearing today is certainly 
premised on an agreed-upon assumption that I know is shared by 
all of us, including the representatives of the unions who are 
here, and that is that we need a system that does provide 
transparency, and we need a system that provides accurate 
information.
    What we seem to be discussing is whether there are adequate 
safeguards, and if not, what reasonably could be done to 
improve those safeguards without looking to both undermine and 
burden members of unions and union leadership. And I appreciate 
Senator Kennedy's line of questioning very much, because it 
does strike me that with regard to the enforcement of all of 
our labor laws, in my view, the administration has been less 
than enthusiastic when it comes to organizing, collective 
bargaining, enforcement of work conditions and safety 
standards. So I understand there is a political agenda at work, 
and I recognize that, but I also hope that in the process of 
trying to come to some resolution of this issue, we do so in a 
way that is fair and recognizing the limits that are 
appropriate for the Government to be setting forth.
    I am troubled by what seems to me to be the evolution of 
this concern over the last months. The original reporting 
requirements as I understand them had legitimate questions but 
have now been transformed into much more stringent expectations 
that would be very difficult for a number of smaller unions to 
comply with; certainly those that are not electronically up-to-
speed would have tremendous difficulties.
    So I think there is some common ground here that we can 
attempt to claim if we put aside the political agenda and look 
to the leadership and membership of unions that I think agree 
that we need some hard look at what the standards are and that 
changes that are appropriate and fair should be made.
    I am particularly concerned about this idea of accounting 
for one's time. That is very difficult for me to understand. 
There is no comparable requirement either when it comes to 
corporations, nor is there a comparable requirement when it 
comes to campaign contributions. It would be very difficult for 
candidates and volunteers and staff to account for their time. 
In-kind contributions, financial contributions, and in the 
corporate world--which I think is still a far better and closer 
analogy because we are looking at an institution, not at a 
biannual creation of an institution that comes and goes; I do 
not think that is analogous whatsoever--but with respect to 
this accounting for time, which I do not see in the law 
anywhere else, how would you expect that to be complied with? 
It would open up so many doors that would be impossible to 
answer the questions that would be forthcoming. What is your 
understanding of that kind of requirement?
    Mr. Yud. Senator Clinton, I would first note that the 
reforms in their current State really have not been changed 
much since the law was passed, so I think there is a time to 
look at these and wonder whether they are as effective today as 
they were 40 years ago. And again, our Notice of Proposed 
Rulemaking applies only to 20 percent of the unions, so 80 
percent of the unions are not required to file the LM-2 report. 
We also expect to provide compliance assistance to them and 
provide software to them to help them do these reports.
    As far as union officer time, when you look at a union as 
an institution, a very key component of union expenditures is 
the time. In many cases, the salaries of the officers and 
employees make up the majority of the expenses of the union. I 
think it is reasonable to say that the members are entitled to 
have some idea of what those salaries go for--in other words, 
where those folks are spending their time in representing their 
members' interests.
    We have made a proposal which allows this to be rounded to 
the nearest 10 percent and just made on some reasonable basis. 
There are unions actually that, like lawyers, keep time 
records. We are not asking them to go to that degree of 
specificity, but in our proposal--and we are looking at the 
comments that we have received, and we are assessing the 
burdens of these things--we have made a proposal that there be 
some allocation of what activities they spend their time on.
    Senator Clinton. And why wouldn't there be an analogy based 
on that argument with corporations? We have seen so many 
examples of what the press sometimes call ``crony capitalism.'' 
I may be an investor in a corporation, and I have no idea 
whether the CEO or the CFO is spending half his time on the 
golf course. I have no idea whether he is spending his time 
feathering his own nest, wining and dining the members of the 
compensation committee so that he can get some kind of golden 
parachute. As a stockholder, I deserve to know that if you are 
making the same argument analogously with a member of a union.
    So it seems to me that what we are doing here is taking the 
time of union leaders and saying that that has to be specified, 
quantified, and held accountable. And as far as I know, we do 
not do that in any other area of Government accountability, and 
I think you can understand why it raises questions about a 
political agenda as opposed to the legitimate questions that 
teachers, other union members, union leaders with the kind of 
record that somebody like Sandy Feldman has of standing up for 
education reform, of standing up for sometimes moving teachers 
beyond where their comfort zone is to do the things she thinks 
are right for education.
    So I do not understand how we can expect to accept these 
changes on face value when it is clear that there is no only a 
political agenda behind them, and it is, as far as I can tell, 
the only area where the administration is interested in 
enforcing labor laws, but also that there is not any comparable 
expectation or standard imposed on any other person who does 
have a public trust. After all, corporations are creations of 
the public. They are chartered. They have obligations to the 
public--although they are sometimes forgotten, and we talk only 
about stockholders, bottom lines, etc.
    So it is very difficult to understand the effort here, 
especially on this time issue, which leaps out at me as being 
particularly burdensome.
    Thank you.
    The Chairman. Maybe we are reaching a consensus that we 
should make unions subject to the SEC rules.
    Senator Dodd?
    Senator Dodd. Thank you, Mr. Chairman.
    Mr. Yud, let me join others in thanking you for your 
service over the years.
    Senator Dodd. Let me just say in terms of full disclosure 
here that George Springer, who has taken on this responsibility 
in Washington, is someone whom I have known for 30 years. I 
have enjoyed our working relationship with this remarkably fine 
individual who has taken on a very difficult task and done so 
with great good judgment and tremendous hard work. I just want 
to thank you, George, publicly at this hearing for the 
tremendous job that you have done. We are very proud of you in 
Connecticut, having worked with you for more than three decades 
on public policy issues.
    This is a thorny matter. Let me underscore the point that 
has been made by everyone here. None of us here wants to be 
associated with anything that involves fraud and criminal 
behavior. That should be a given. So we are not here to debate 
and discuss that at all. Obviously, hard work needs to be done.
    I think it is important for people to have some sense of 
what we are talking about here. There are some 3,000 local 
unions under the AFT. Unlike most unions, it is decentralized; 
is that not true, Mr. Yud?
    Mr. Yud. I am not an expert on how the AFT is organized.
    Senator Dodd. More than 2,700 of these locals have fewer 
than 1,000 members. Most of them are rather small unions, 
locals. I think it is important to keep that in mind as we look 
at this. I will State as a matter of fact that it is probably 
the most or one of the most decentralized of the national 
unions in the sense that a lot of autonomy is given at a local 
level.
    So while we are talking about two very egregious cases 
here, and certainly ones that deserve tremendous attention, and 
the AFT has done just that--and President Bush to his credit 
has commended the AFT for the steps they have taken, and I 
thank President Bush for doing that, because there is too often 
the temptation to indict and malign an entire group of people 
who have dedicated their lives to teaching young Americans in 
our wonderful education system. So we thank him for that.
    Because Senator Kennedy made some reference to it, Mr. 
Chairman, I am going to ask unanimous consent that a letter 
that was sent in February of 1992 to Lynn Martin and Clayton 
Yeuter from Newt Gingrich be included in the record, and I will 
just read part of it--a letter being circulated in the House, 
calling for two specific actions on the Beck decision. ``These 
two steps are long overdue''--I quote the letter. ``It will 
weaken our opponents and encourage our allies if we take these 
two steps.'' One, he talks about ordering the Department to 
require posting of workplace notices. ``No. 2, order the Office 
of Labor-Management Standards to institute changes in LM-2 
union reporting and disclosure forms to provide people with 
essential information on dues expenditures, so weaken our 
opponents and strengthen our allies.''
    That was 11 years ago, but nonetheless I think it is worth 
noting that there have been certain political motivations 
beyond the obvious problem that we need to deal with in terms 
of these two particular cases.
    Now, if I can, let me raise a specific question. I would 
like to get some sense of budget if I can here. I note the 
President has asked for a small increase, about $5.3 million, 
in the budget to conduct these audits. There have been 
reductions, actually, in the budgets of your office over the 
last number years. Is that not correct?
    Mr. Yud. That is correct.
    Senator Dodd. So just as a practical matter in terms of the 
point you make in your statement about the amount of work that 
has to get done to conduct these audits, clearly, there is 
going to be an increased amount of work as a result of these 
rules taking place that will demand even more attention.
    Are you satisfied that the budget increases you are going 
to be receiving are going to make it possible for you to not 
only handle this increase in the amount of workload but also 
the backlog that has accumulated as a result of the decline in 
budget authority to support the very office you are involved 
in?
    Mr. Yud. Yes, Senator Dodd. One thing about the new forms, 
of course, is that we were going to an electronic version, and 
that should considerably help with the processing of that.
    Another big advantage of that is that, as I say in my 
written statement, we will have an electronic audit program 
which is very efficient and requires very little hands-on, so 
that when these reports come in, they will be subjected to 
certain electronic audits, and we can ensure that they meet 
certain minimum standards of acceptability.
    So I think we can apply those efficiencies, and yes, sir, 
I----
    Senator Dodd. And handle the backlog as well?
    Mr. Yud. Yes, sir.
    Senator Dodd. I wonder if you might share with us what the 
process was on the Notice of Proposed Rulemaking. Let me ask a 
series of specific questions and ask you to comment on them if 
you would.
    I would like to know whether you worked with the AFT either 
before proposing the rules or during the comment period, number 
one. Were public hearings held, and did they hold comprehensive 
stakeholder meetings; how many public comments were received; 
and is there any final time line for the decision?
    Mr. Yud. Public hearings were not held prior to the Notice 
of Proposed Rulemaking----
    Senator Dodd. Why not?
    Mr. Yud. Stakeholder meetings were held.
    Senator Dodd. But why not public hearings?
    The Chairman. Why don't you let him answer the question?
    Senator Dodd. Go ahead.
    Mr. Yud. I think the approach was that international union 
officers were invited to participate in meetings, and I think 
as many as 40 or more did participate in those meetings, and 
the approach was taken to meet directly with I think an 
affected universe here, which is primarily represented by the 
national union.
    So two or three of those meetings were held. I think over 
40 unions participated in those meetings, sent a representative 
to those meeting. And--I am sorry--your other question--I 
honestly do not know if the AFT participated in that or not.
    The Chairman. The AFT is not subject--most of their unions 
are not subject to these rules.
    Mr. Yud. Right. The national union reports, and some of 
their affiliates do, but again, of those representatives that 
were there, I do not know whether the AFT had a representative.
    Once the Notice of Proposed Rulemaking went out, we 
received nearly 36,000 comments, and we have not held 
individual meetings with any unions concerning the rulemaking, 
and I do not think it would be appropriate necessarily during 
this period of time. We have received the comments, the period 
for commenting is closed, and we are now analyzing those 
comments.
    Senator Dodd. Are you aware of any software available for 
unions or others to handle the additional reporting 
requirements? Some 2,700 of the 3,000 locals--some of them are 
rather small in terms of their ability to be able to do this 
inexpensively.
    Mr. Yud. Well, of course, we already have an electronic 
Form LM-2 which many unions already use to complete their 
report, and we will be providing unions with compliance 
assistance and information on alternative ways that they can 
set up their records to facilitate completion of the reports.
    A smaller union may simply fill out the report afresh, so 
to speak, just make the entries right onto the form, or they 
might cut-and-paste entries from their bookkeeping records onto 
the form.
    We will provide unions with a software that will take their 
records and put them on the form. So there will be a variety of 
approaches, but I think some of the smaller unions may just 
fill it out afresh, so to speak, and make the entries directly 
onto the form.
    The Chairman. I think we need to move on to Senator Bond, 
if you do not mind.
    Senator Dodd. Let me just thank you, Mr. Chairman, and let 
me also join in thanking Sandy Feldman as well, whom I have 
worked with over a number of years, and comment her and her 
leadership on this issue both here in Washington and in Dade-
Miami. You are to be commented for the efforts being made to 
deal with this, and we thank you for your leadership.
    Thank you, Mr. Chairman.
    The Chairman. Senator Bond?
    Senator Bond. Thank you, Mr. Chairman.
    I do not want to prolong this because we need to get to the 
next panel, but the 11 convictions per month over the last 5 
years of criminal activities is of great concern. Are the rules 
that you are proposing designed to prevent or eliminate 
criminal activities--I mean, criminal prosecutions deal with 
those who have stepped over the line, but is it your hope that 
by providing greater information to members and others, it will 
somehow lessen the frequency of such criminal activity? How 
does this rule relate to the heavy workload that you have had 
on the criminal side?
    Mr. Yud. Senator Bond, as I said earlier, I think a primary 
purpose is to give union members the information they need to 
engage in effective self-governance. I think as an additional 
result of that, members who have more information will be able 
to exercise better oversight and control on their own. So to 
the extent that somebody has to provide a little more detail 
about exactly what kinds of expenditures are being made, it 
becomes more difficult, I think, to cover that up or to 
disguise it, and so I would expect that it would have a 
deterrent effect, yes.
    Senator Bond. Thank you, Mr. Yud.
    Thank you, Mr. Chairman.
    The Chairman. Senator Reed, did you have any questions?
    Senator Reed. No, Mr. Chairman. I am ready to go forward.
    The Chairman. Thank you very much.
    Thank you, Mr. Yud, and we thank you again for your service 
over 36 years. We appreciate it.
    Mr. Yud. Thank you.
    The Chairman. We are now joined by our second panel, if you 
folks would come forward to the witness table.
    While they are taking their seats, let me begin by 
introducing our panel. We are joined, as has already been 
reflected by a number of members, by Sandra Feldman, who is the 
president of the American Federation of Teachers. This union 
played a critical role in uncovering some of the very egregious 
activity of the Washington Teachers Union. We congratulate them 
for their aggressive investigative activity and for bringing 
this to light and their attempts to remedy the situation, and 
we look forward to hearing from Ms. Feldman.
    We are also joined by Thomas Donahue, who of course is a 
very well-known national individual. He has led the AFL-CIO as 
president and as secretary-treasurer. We appreciate his taking 
the time to be here. He presently serves as chair of the 
Advisory Committee on Labor, which is a committee that assists 
the State Department.
    We are also joined by Roland Ashby-Rier. Mr. Rier is a 
teacher, and he is here in Washington--he has not yet joined 
us, but I think he is going to join us--we had better wait to 
introduce him until he makes it. I apologize.
    Our next witness is Damaris Daugherty, who is involved in 
the Miami issue. She helped found a group called the Teachers' 
Rights Advocacy Coalition, TRAC, back in 2001. For a 
considerable period of time, Ms. Daugherty has been raising the 
red flag about concerns relative to the way the Miami union was 
being operated, especially about its management and its 
leadership, and therefore, she brings to the table a very 
important element of the review of that union's leadership and 
their failure to properly protect their membership.
    We will begin with you, Ms. Feldman, if you do not mind.

STATEMENTS OF SANDRA FELDMAN, PRESIDENT, AMERICAN FEDERATION OF 
 TEACHERS, WASHINGTON, DC; THOMAS DONAHUE, SENIOR FELLOW, WORK 
IN AMERICA INSTITUTE, AND FORMER SECRETARY-TREASURER, AFL-CIO, 
   WASHINGTON, DC; AND DAMARIS DAUGHERTY, FOUNDER, TEACHERS' 
              RIGHTS ADVOCACY COALITION, MIAMI, FL

    Ms. Feldman. Thank you very much, Chairman Gregg and 
members of the committee. We are very grateful for the 
opportunity to testify about the apparent and appalling misuse 
of funds and abuse of trust that we have experienced in our 
union.
    I am sickened and infuriated by the betrayal of the 
members' trust and even more so, if that is possible, because 
of what public education and teacher unionism mean to me. It 
was public education from kindergarten through college that 
made a successful life possible for me, and it was through 
teacher unionism that I could fight to improve the education of 
kids who great up as poor as I did, while also striving to 
improve the working lives of the men and women teaching them.
    For me, teacher unionism has been about idealism. 
Corruption has never been part of our past, and I can assure 
you I will continue to do everything in my power to see to it 
that it will not be part of our future. To that end, we have 
just taken a series of important steps to increase fiscal 
oversight of locals, and I will describe them in a minute.
    But I also want you to understand that at the heart of our 
history is an intense commitment to the independence of our 
local union. The AFT, as has been pointed out, has a tradition 
of strong local unions with complete autonomy, from electing 
officers to setting policies to setting their own local dues, 
making their own budget, bargaining, ratifying, and enforcing 
collective bargaining agreements with their own local boards of 
education.
    This closely tracks the strong tradition of local control 
in the public school systems, and it is why he AFT constitution 
has provided for relatively little fiscal oversight of local 
unions in the past.
    Over the years, we have built a strong national union, but 
it does not run locals. It exists for mutual self-help, to 
address national concerns and to conduct research on and 
advocate for educational improvements, high standards, and 
other issues of importance to our members and the people they 
serve.
    For example, President Bush and Secretary Paige have 
recognized the AFT's leadership on how to best teach reading, 
and the Department of Education is working with us, as did the 
previous administration, to help provide the Nation's teachers 
with solid research-based approaches to the teaching of 
reading.
    So how did things go so terribly wrong in two of our 
locals? How can we set things right and prevent this from ever 
happening again? It is a question that I have been constantly 
asking myself--could we have seen the warning signs sooner, and 
even if we had, with hindsight, which of course we know is 
always 20/20, could we have done more?
    As I have said, the AFT consists of fiercely autonomous 
local unions just under 3,000, ranging in size from two members 
in an island community to 115,000 in New York City. Some 2,748 
locals out of that almost 3,000 have fewer than 1,000 members 
each, and our Constitution, procedures and practices reflect 
our tradition of local autonomy.
    So while our Constitution requires that local unions 
undergo audits or financial reviews at least every 2 years, 
make them available to their members and submit a copy to the 
national office, we have had no enforcement provisions because 
neither our history nor our experience indicated that more was 
needed, and instead, we have relied on the power of persuasion, 
not the persuasion of power.
    With regard to the Washington Teachers Union, we have 
repeatedly sought copies of audits from the president of the 
WTU and the payment of back dues. But we first discovered that 
something was seriously wrong last summer, when teachers 
alerted the AFT national office about an overcharge in the 
automatic dues deduction.
    We sent in the AFT's financial services department, which 
soon found several serious irregular transactions, including 
checks and credit card purchases, without proper authorization.
    We then notified the U.S. Attorney's Office, which began 
investigating the WTU with the full cooperation of the AFT. The 
local executive board asked for the resignations of the 
officers allegedly involved, and the AFT hired a forensic 
auditor who ultimately reported the misappropriation of some $5 
million.
    All the excruciatingly painful details that you have read 
about came directly from our forensic audit, which we promptly 
provided to all the AFT members and made public.
    In January, the AFT executive council voted unanimously to 
appoint an administrator to run the day-to-day operations of 
the WTU. The case in Miami first came to our attention in a 
different manner. There, we had no knowledge of any alleged 
wrong-doing by the local's president until the FBI raided the 
union's headquarters on April 29. Nor did we learn that the 
local was having serious financial problems until 
representatives of the UTD came to us last January requesting 
that we guarantee a large loan. We never gave that guarantee 
because they failed to provide satisfactory answers to our 
questions about their financial situation.
    Over the years, the UTD's audits, conducted by a reputable 
national accounting firm, had never indicated that there were 
difficulties until a problem appeared on the very last audit 
conducted by a local accounting firm and submitted in March of 
this year. And as in the Washington situation, once we became 
aware of potential financial mismanagement, the AFT executive 
council appointed an administrator for the Miami-Dade local. 
Both in Washington and in Miami-Dade, the administrations are 
now getting those locals back on the right financial track.
    Meanwhile, on the national level, we have created stronger 
procedures to help prevent or detect possible corruption in any 
local union, and let me briefly describe them.
    First, under our new rules, if a required audit or 
financial review is not submitted to us within 6 months of the 
close of the local's fiscal year, the national AFT president is 
authorized to employ an auditor to review the local's finances, 
inform the local's members immediately, and report the results 
to the members and to the AFT executive council.
    In addition, because one sign that a local might be having 
financial difficulties for any reasons is if it falls 
significantly and unaccountably behind on its dues payments to 
the AFT, our executive council strengthened the procedure for 
dealing with late payments.
    Now the AFT, after notifying a local that becomes 2 months 
behind in its payments and does not correct it in a timely 
manner will directly notify the local's executive board and 
State affiliate. If the payments are still not made, we will 
communicate directly with the members of that local, and the 
AFT president is authorized to send in an auditor to examine 
the books. So for the first time as a national union, we can 
now directly inform a local's members of a potential problem, 
and we have a streamlined mechanism to employ our own auditor. 
We believe very strongly that the knowledge and involvement of 
members is the strongest tool that we have.
    What has happened in these two locals is a tragedy, but it 
is also what educators call ``a teachable moment.'' Our 
newspapers and website have kept our members and leadership 
throughout the country informed about these situations. The 
website is carrying the WTU's full forensic audit, with all its 
ugly details, along with our own AFT financial statement which 
is audited by an independent firm. A similar forensic audit 
will be completed and posted for Miami.
    We are developing additional training programs for local 
union presidents, treasurers, and other officers in financial 
management, recordkeeping and reporting.
    I am determined, out of outrage and belief, to guard our 
historic mission--to nurture the open, honest, democratic union 
that the AFT has always been, which gives voice to teachers' 
aspirations to improve education for all of America's children, 
for the good of our communities and for our country.
    Thank you for listening, and I am prepared to answer any 
questions you have.
    The Chairman. Thank you, Ms. Feldman.
    [The prepared statement of Ms. Feldman may be found in 
additional material.]
    The Chairman. Mr. Donahue, we would be happy to hear any 
statement you wish to make.
    Mr. Donahue. Thank you, sir.
    Mr. Chairman, committee members, Senator Bond, I thank you 
for being patient. I have submitted a written statement for the 
record, but I would like to make a few comments. The statement 
that is filed includes a lengthy statement of my background, 
but for your purposes, I think it is sufficient for me to say 
that I have spent 41 years in the trade union movement working 
at the local union, the national, and at the federation level, 
including 16 of those years as secretary-treasurer of the AFL-
CIO and a short term as president of the AFL-CIO.
    I think I bring to this hearing the unique perspective of a 
trade unionist who has also served as assistant secretary of 
labor for labor-management relations. Indeed, Mr. Yud was one 
of my staff when I was in the Department of Labor. That was 
back when he had blond hair, and I had a full head. [Laughter.]
    Let me say at the outset that I have enormous respect for 
the American Federation of Teachers and for all of its 
officers. I hold it in such high regard because I sincerely 
believe that it is a primary reason why today's teachers have 
greater professional development opportunities, why all of our 
States have academic standards in place.
    My purpose in being here is to provide a little background 
of union structure so that you will understand where the AFT 
fits in that framework to enable you to see the current 
problems in two locals of that union in their appropriate 
context. I would also like to comment on the proposed LM-2 
reporting requirements that the Department has proposed and 
which have been discussed here by Mr. Yud.
    Those were not motivated by the WTU since they predate the 
discovery of that misconduct and would not in my opinion have 
prevented it. Unions are democratic structures in which members 
elect their officials at the local, State and national levels, 
in free and fair elections, meeting elaborate standards 
prescribed by the Department of Labor. They seek the fullest 
involvement of their members in union affairs, but each of my 
unions is a product of its own history and orientation, and to 
some extent, that of the industry or government in which their 
members work.
    The AFT is by design and tradition decentralized--highly 
decentralized--with teachers employed by thousands of school 
districts across the country. It makes sense that the union is 
a federation, a structure which affords local independence and 
responsiveness to local issues and minimizes the degree of 
control and supervision the national office exercises. Since 
its founding 80 years ago, that approach worked superbly well 
for the national union, for its locals, and most importantly, 
for all of its members.
    You are here today talking about the exceptions--the 
shocking exceptions--but it is important to remember the 
overwhelming majority of AFT locals operate democratically, 
under leaders who possess integrity, expertise, and a 
commitment to member service.
    Let me suggest that the way to judge a national union is 
not by the despicable actions of a few individuals; rather, 
judge the character of the AFT and its officers and board by 
their response to those actions, and the AFT has responded 
well.
    Ms. Feldman has described at length the steps the AFT has 
taken to handle the current problem and to prevent any sort of 
repetition of it. I think the AFT is clearly on track in 
addressing the problem. They are dealing with it at the local 
level, at the national level, encouraging further member 
involvement in these issues, and increasing the supervisory 
role of the national union.
    The supervision and intervention of the AFT will now be 
able to be exercised when the first warning signs appear of 
difficulties in local unions. I think they are vigorously 
addressing the problem.
    As people here who are concerned about those aberrations, 
though, you should know that the proposed changes in the union 
disclosure forms that are being considered here, described by 
Mr. Yud, are not aimed at this occasional crook or at the trade 
unionist who betrays the members' trust, nor will they reduce 
the incidence of this type of crime. What they will do is cause 
unions to spend many more millions of dollars than have ever 
been stolen in an incredible maze of recordkeeping and filing. 
They represent an enormous intrusion into the details of a 
union's operations never envisioned by the framers of the 
Labor-Management Reporting and Disclosure Act. They would force 
unions to disclose to employers, to the employer consultants 
who infest the labor relations scene, details of union 
operations which might well telegraph a union's organizing or 
bargaining strategy and deeply injure its members.
    Unions currently disclose their spending willingly and 
gladly so members know where their money is going, what it is 
being used for--and most unions did that before any law 
required it. Every union I know of presents to its conventions 
or annual/biennial meetings a full accounting for all moneys 
received and expended. Members get an opportunity to review 
financial statements which are often posted on union websites 
and are published in union publications, and they obviously can 
and do ask questions of their leaders at any meeting they 
choose.
    The current version of the LM-2 form requires unions to 
disclose staff salaries, to include detailed categorical 
spending, which means rigorous and detailed recordkeeping by 
unions. That is a burden they have accepted because they 
believe it serves a useful purpose.
    Looking at the proposed regulations, the Airline Pilots' 
Association did a detailed study of what these new regulations 
might mean to their organization. They concluded that the new 
rules would result in 15,863 pages of data from that union 
alone that would not help the members in any way to understand 
ALPA's financial picture any better than they do now.
    The AFL-CIO study of the proposed changes concluded that 
the average cost to a national union to apply would be over 
$1.2 million, and the average cost to each local would be 
$218,000. In aggregate, the AFL-CIO estimates a total cost to 
comply for all reporting unions of $1.2 billion, which would 
translate, incidently, into a charge of about $96 per member in 
a reporting union. That is a very heavy tax to lay on union 
members.
    There is such an enormous disparity between the figures I 
offer you and the figures which the Department of Labor offers 
that it seems to me, if I may suggest, Mr. Chairman, that 
somebody needs to ask the Department of Labor to try to 
reconcile these figures or to rebut the AFL-CIO figures. You 
know the way the regulatory process works, that is not 
happening, and yet you have this enormous disparity in the 
estimates of the cost of compliance.
    The truth is that the profusion of information, the 
enormous detail that would be included, would not increase the 
accountability of officers to members. It would instead tie 
them up in enormous recordkeeping and time measurement chores. 
No union member pouring over all that detail would be able to 
detect mis-spending, and I question whether the Government 
would be able to do so.
    Mr. Yud testified today that because of budget stringency, 
the Department of Labor has abandoned the program of systematic 
field audits that it had conducted for many years. That being 
the case, it is difficult to see how the Department could deal 
with the welter of detailed information the new report forms 
would engender. The proposed changes are simply not the answer 
to increased accountability. Whether the proposed changes come 
from the best intentions or the worst, their effect would be 
the same--more money from workers would be spent to cover 
administrative and accounting functions; less money could be 
spent to improve working conditions, to raise the quality of 
the institutions in which they work, and to help workers better 
serve the Nation.
    Thank you, Senator.
    The Chairman. Thank you, Mr. Donahue.
    [The prepared statement of Mr. Donahue may be found in 
additional material.]
    The Chairman. Ms. Daugherty?
    Ms. Daugherty. Thank you, Mr. Chairman.
    Good morning. I am Damaris Perez Daugherty. I am the wife 
of a public school teachers and mother of two children who are 
in the public school system in Miami-Dade. I am also the 
daughter of two Cuban immigrants who are an American success 
story, and I am very proud to tell you today that my father was 
the founder of one of the first labor unions in Cuba before 
coming to the United States.
    I am executive director of the Teacher Rights Advocacy 
Coalition, or TRAC. TRAC is a professional organization 
dedicated to empowering educators and elevating their status. 
We are fighting to expose corruption in our school district and 
bring about accountability. Unlike the local teacher union, the 
United Teachers of Dad, we are an open and democratic 
organization where each member has a voice and a vote.
    I would ask you today to consider one question: Would you 
feel comfortable having a fox guarding a hen house?
    While unions have undoubtedly achieved important goals and 
helped to make America a more just and equitable society, in 
recent times, some unions have lost their focus and have 
allowed their executives to enrich themselves at the expense of 
their membership. A few collective bargaining agreements go so 
far as to erode constitutional rights such as the right of free 
speech, freedom of association, and the right to counsel. Those 
organizations that have stepped over the line need to refocus 
and must be made to answer to the people they represent.
    A well-publicized example of a union run amok is UTD. For 
years, widespread rumors of corruption within UTD have abounded 
in our school district. Numerous entities should have exposed 
the corruption, but they chose to look the other way. The union 
boss, Pat Tornillo, had his tentacles throughout the State, and 
many fear or owe him.
    While the stench of corruption and graft has been burning 
in the noses of the citizens, the various powers have been 
handing out snuff.
    Teachers in Miami pay the highest dues in the Nation--$843. 
Why? So that Pat Tornillo can take vacations around the world, 
enjoy spa treatments for himself and his wife, buy liquor, and 
pay for his maid with teachers' dues moneys.
    Tornillo enjoyed these illicit perks over and above his 
quarter-million-dollar salary, $42,000 unverified expense 
account, and a very generous benefits package. These illicit 
expenses went unchallenged by the executive board of UTD--the 
same board that remains in power today at UTD.
    As Tornillo was misappropriating the teachers' dues moneys, 
UTD was telling the teachers of Miami-Dade to apply for 
Medicare health coverage for their children because the union 
was powerful to negotiate an affordable health care package.
    Why didn't anyone intervene on behalf of these workers? The 
local State attorney's office has heard of the corruption for 
years, but did not take one step toward investigating. AFT has 
told us today, several times, that they are powerless by their 
own charter to do anything.
    Furthermore, AFT knew since 1999 about UTD's financial 
troubles and did not intervene. Ms. Feldman referred to UTD's 
audited financial statements by a reputable national accounting 
firm, and I just happen to have some of those financial 
statements in front of me, and I will read from the financial 
statement dated September 30, 2001 and 2002.
    ``In December 1999, the Union, UTD, obtained an unsecured 
loan for $1.3 million from a bank to pay for back dues to the 
American Federation of Teachers, an affiliated organization. 
This loan is guaranteed by AFT.''
    So at least as far back as 1999, UTD was in arrears to AFT, 
and AFT did not intervene to safeguard the teachers of Miami-
Dade County. So telling us that we can count on the AFT to 
clean up the mess in Miami is the same as telling us that we 
should feel comfortable sending in Fidel Castro to watch Saddam 
Hussein on human rights issues.
    The Florida legislature has proven itself powerless against 
the unions. During the 2002 and 2003 session, bills were 
introduced by different members both in the House and Senate, 
calling for greater accountability on the part of the unions. 
Both times, the union lobbyists defeated those measures.
    Our school district cannot be trusted to protect the 
workers. They have colluded with the local union to deny 
workers their constitutional right to counsel. In addition, UTD 
has systematically denied representation to teachers who are 
being brought up on charges by the district. This has led to 
countless abuses in our school district.
    The Florida Public Employee Relations Commission is the 
body charged with ensuring union compliance with statutory 
reporting requirements. PERC has not been granted powers to 
investigate or impose sanctions.
    The story of Judy Herrell exemplifies what happens when the 
fox is guarding the hen house. Judy has been a teacher in our 
school district for 30 years. She was a UTD shop steward for 12 
years. She had an amazing membership at her school because she 
was so supportive of the union and its ideals. But slowly over 
time, she became very suspicious of UTD's accounting practices. 
Eventually, through her persistence, she discovered two dead 
people on the payroll. When she questioned the union boss about 
it, she was told to butt out. She was then put on trial by the 
union, and her stewardship was terminated for questioning the 
finances.
    Workers who see value in belonging to a union should be 
able to do so. However, they should not be at the mercy of 
union executives who believe themselves to be above the law. 
Unions exist for the people; they are by the people, for the 
people. The people should know what is being done with their 
own money.
    Can educators in Miami-Dade count on the State attorney, 
AFT, FEA, the State affiliate, the legislature, the school 
district, or PERC to protect them? The answer is a resounding 
no.
    We need Federal legislation that will wrest from UTD and 
similarly corrupt unions the power they have inappropriately 
usurped from the workers of this country, and we need to return 
those unions to their once lofty goals. Without your 
intervention, certain union executives will continue to manage 
union funds as if they were their personal expense account.
    In closing, the newest justice of the Florida U.S. Supreme 
Court--and a Cuban American, I might add--Raoul Cantero, has 
been quoted as saying: ``The true measure of a person is how he 
treats those over whom he has power.'' Measured by that 
standard, some unions fall criminally short.
    Thank you.
    [The prepared statement of Ms. Daugherty may be found in 
additional material.]
    The Chairman. Thank you very much, Ms. Daugherty, and I 
thank all the witnesses for their testimony.
    Ms. Feldman, I think one of the issues here which is fairly 
clear is is there some process or some system that can be put 
in place to assure that we adequately audit and have 
information that is transparent for union membership to look at 
from unions and your affiliated unions--all unions--I am not 
talking about the AFT.
    Let me begin by saying that I congratulate the AFT for the 
effort in Washington. I think it was a very, very strong effort 
and well-done. But I guess the question is this. As I 
understand it, essentially, if a union is current on its dues 
or, as Ms. Daugherty has represented if she is correct, has 
even borrowed to pay its dues, your national union is basically 
not going to be in a position to pursue any sort of audit 
oversight or transparency activity; is that correct?
    Ms. Feldman. No, not currently. That was true before we 
adopted these new procedures which I just described to you, 
which as I said was what we considered ``a teachable moment.'' 
And we are going further than that in constitutional changes 
which we will bring to our next convention.
    But first, let me say a couple things about what you have 
raised and some other issues. Most local unions in school 
districts do not collect dues over the summer. So there is a 
certain amount of arrearage built in because they simply do not 
get the dues over the summertime from the board of education. 
So we have a period, sort of a grace period now, of 2 months.
    If we find that local unions are in arrearage more than 
that, we now will be able to take a series of steps which we 
were not able to take before. We will go the local's executive 
board, tell them that the local has not paid its dues--
obviously, if the members of that executive board did not know 
it, they would know it now, and they would now have some 
information on which to raise questions. If something was not 
done about it that way, we would actually go to the full 
membership of the local, which we never could have or would 
have done before.
    The Chairman. Not to interrupt, but actually to interrupt, 
my point is that it appears that the enforcement mechanisms, 
what energizes an audit, what energizes an oversight review by 
the national in at least your organization, is tied to whether 
or not dues are current.
    Ms. Feldman. No. That is one of the things, because very 
often, that is a sign that there is something wrong. The other 
thing is that if we do not get an audit or financial review 
from them, then we will also now have the power to go in, do 
our own audit, go to the members, tell them that we think there 
is a problem there, that we have not received an audit.
    For example, we also have this administratorship going in 
the Miami local and in the Washington, DC local. We have 
reduced the dues in Miami. The local executive board is not 
currently in authority. So we have taken these steps--we have 
reduced the dues, we have taken over the local. The local 
executive board does not have authority over the local.
    And I just wanted to straighten out one thing. You know, 
Florida is a right-to-work State. No one can be compelled to 
join the union in Florida. In fact, there is no place in the 
United States of American where a teacher cannot get a teaching 
job unless they join the union. That was a statement that was 
made by Senator Alexander, and I was hoping he would be back so 
I could correct the record while he was here. That just is not 
a true statement. Teachers are hired by local boards of 
education. If a union is in place, they can join the union, and 
they may not want to join the union. They do not have to join 
the union in any situation. There are some in which they do pay 
a fee, just a fee that is calculated as a result of what it 
costs the union to represent them in collective bargaining, and 
that would only be in collective bargaining situations.
    In Miami, which is part of a right-to-work State, the State 
of Florida, there is absolutely no compulsion to join the 
union. I just wanted to get that on the record.
    The Chairman. I appreciate your wanting to clarify that, 
and I am going to put that clarification on Senator Alexander's 
time, who was not here.
    Ms. Feldman. OK, that is fine with me.
    The Chairman. The issue, though, is how do we put in place 
a process which creates transparency and gives the information 
that is necessary so that when an incident like Washington or 
Miami occurs, there is a reaction from some oversight 
organization that has the capacity to go in and correct it.
    Ms. Daugherty's point is that a lot of people who should 
have been on top of this failed. Whether she is correct or not, 
I do not know, but obviously, somebody failed because this went 
on for quite a while. In the Washington situation, it was clear 
that there was a failure. And I guess my question is it does 
not seem to me that maybe it is even your national's 
responsibility to go this far, which brings us to the second 
question, which is what is the proper role of the Department if 
Labor in this area. Most of your unions are public and 
therefore are not subject to Department of Labor filing 
requirements, so I guess I would ask the question of Mr. 
Donahue--how do you think we can put in place a system that is 
going to adequately address the issue of getting transparency 
to the workers and making sure that, whether it is the local 
attorney general, district attorney, or whether it is the 
Department of Labor or the national union, has the capacity to 
step in and knows enough information to see that there is a red 
flag there, the way it should be.
    Mr. Donahue. I think, Senator, we have such a system, and 
it is called free and fair elections. These unions are 
required--local unions are required--to hold an election every 
3 years. If the members are unhappy with the reporting that 
they receive, if they think that their business agent is not 
producing for them, that their officers, president, or 
executive board members are not producing for them, they can 
vote them out of office.
    I think that that is a self-policing mechanism, and it is 
the same mechanism that you subjected yourself to. The 
representatives of the workers have to satisfy the workers. 
They do not have to satisfy Sandy Feldman. The president in 
Miami does have to satisfy Ms. Daugherty if she is a member of 
the union, because he is seeking reelection. I think that 
system will take care of it, and I believe that it does. I 
mean, you are looking at an infinitesimally small number of 
cases here.
    Ms. Feldman. May I respond also to that question?
    The Chairman. Yes, and then, Ms. Daugherty, if you would 
also give us your thoughts because you said you wanted Federal 
legislation, and I want to get specifics there.
    But go ahead, Ms. Feldman.
    Ms. Feldman. From our perspective--and for a moment, I will 
put on my hat as a local president; I was president of the 
local union in New York City for 12 years--we published our 
audits in our union newspaper; we made a budget in an executive 
board of over 100 people, so that every, single line was looked 
at. We also had a union--have a union--there which is very 
lively, full of membership involvement, lots of activity both 
at the building level and at the local union level across the 
city. I was in those schools two to four times a week, talking 
with members. Members had forums in which to raise their 
questions, raise the issues.
    So that from our perspective, we do the reporting--by the 
way, you know, the Washington Teachers Union had reported on 
the LM-2 falsely, not discovered by the Labor Department; the 
audits had been in place in UTD Dade, and no one had really 
raised a question until we started raising questions because we 
were asked for a loan, which we ultimately did not give because 
of those growing concerns--so really, we believe that rather 
than bureaucratic government paperwork being increased, what we 
need to do is further the democratic involvement of the 
members, and that is what we as a national union--we will go in 
and do audits, we will provide an administratorship and take 
over a local if we see the kind of terrible misdeeds that we 
have seen in these two locals, which again I think needs to be 
emphasized really is a very small number when you consider the 
unions out there. But the best insurance against the kind of 
terrible things that were done in these two locals is for the 
members to be active and involved and to make sure that they 
look at the financial statements, that they ask the questions. 
And I do not accept that a member can be intimidated from 
asking those questions, because if there are democratic 
procedures in place, as Mr. Donahue said, you can vote somebody 
out of office, or you can inform others. I was never informed 
by members of the local in Miami of potential problems, and the 
members of that local have the right and the obligation to make 
sure that their local is being run properly and that their 
money is being spent properly.
    The Chairman. Ms. Daugherty?
    Ms. Daugherty. Yes, sir. Pat Tornillo has been in power in 
Miami-Dade for over 40 years. In that time, there have been no 
real elections. These are not my words. I have a very good 
relationship with quite a number of the union stewards, who in 
fact have contacted me on more than one occasion to thank me 
for my efforts because for years, they had been trying 
internally to clean up UTD, and they were met with resistance, 
and at council meetings where the stewards met, if they dared 
to oppose him, they were ridiculed publicly.
    I have been told personally by a gentleman who has been a 
steward for 20 years that he did not dare run against Pat 
Tornillo because he would be put in ``UTD purgatory.'' And this 
is a union man, his father was a union man; in fact, his father 
worked for the teamsters.
    The Chairman. You said you wanted specific Federal 
legislation. Can you give us a general overview, if you have 
thought it through, what that would be that would address the 
problems that you saw in Miami?
    Ms. Daugherty. Well, sir, the rules that are being proposed 
are fine. Unfortunately, we do not think they go far enough, 
because number one, they would not affect a local like the 
local in Miami, so members would still find it impossible to 
have financial data at their fingertips to see what the union 
is doing with their money. And also, the audited financial 
statements that we have discussed before are insufficient 
because, reading again from one of them, under ``Expenses,'' it 
says, ``Program Services, Education and Legislative Program, 
$4.2 million.'' No one knows what that is.
    We would like to see the law expanded so that all unions 
would have to report to either the State or the Federal 
Government and provide full disclosure as to what they are 
doing with the members' money. And I realize that it may be a 
burden. It is part of the cost of doing business. I believe 
Senator Clinton said before that there are no such requirements 
in the law that you have to account for your time, but if you 
will look at the law concerning not-for-profits, and you talk 
to the Internal Revenue Services, there are requirements on 
people accounting for their time for different activities, 
because once again, these are organizations that are receiving 
money that is not theirs; they owe a fiduciary trust to the 
people who are giving them the money, so they would need to 
account for that money.
    So we would like to see the rules go further and the 
legislation go further into detail, because I have seen the new 
form, and still, the categories are rather large and vague.
    The Chairman. Senator Bond?
    Senator Bond. Thank you very much, Mr. Chairman.
    Mr. Donahue, you talked about the fact that there were not 
audits by the Department of Labor. Are you here supporting 
additional resources so that there are more auditors? Will this 
help assure fidelity and transparency in union matters?
    Mr. Donahue. I think, Senator, that is a question that you 
all answer in your judgment----
    Senator Bond. No, no. I want you to tell us how we clean it 
up.
    Mr. Donahue. I would suggest to you that you are in a 
continual struggle with priorities. I would put more money into 
OSHA investigations than into LM-2 investigations----
    Senator Bond. So you do not think----
    Mr. Donahue [continuing]. And I assure you that the audit 
program covers, even in the weakened condition that Mr. Yud 
describes, a higher percentage of unions than the OSHA 
inspections cover as a percentage of workplaces.
    So I would put much more money into OSHA investigations.
    Senator Bond. In other words, you are not concerned about 
11 criminal convictions a month. This is not something that we 
need deal with. So let me turn----
    Mr. Donahue. If I may respond, Senator, I think you have to 
take a look at what are the 11 convictions. I have no idea what 
they are. Is it somebody who misspent $1,000 over a 5-year 
period, or is it somebody who is guilty of real thievery?
    Senator Bond. I can assure you that the courts are not 
interested in the former.
    Let me go to Ms. Feldman. You talked about the importance 
of union elections. In the written testimony submitted by Dr. 
Ashby-Rier, he noted that in the AFT convention in July of last 
year in Nevada, there was no secret ballot. The ballots were 
handed to him and taken back by the union president. His 
written testimony indicates that the governance would be 
improved, and there would be much more pressure to clean up 
unions if there were truly a secret ballot. Is his statement 
correct, and is that the kind of election that is conducted at 
the local level, or are they true secret ballots?
    Ms. Feldman. Senator, thanks so much for asking that 
question, because I think he is just confused. In our union, 
delegates are elected to a convention at the local level. They 
represent the local. They are elected in a secret ballot 
election by the membership. They come to a convention much in 
the same way as you are elected in your State, by a secret 
ballot of the voters in your State. You come to the congress, 
and you vote openly in the congress. In our convention, we vote 
openly. These are delegates who are elected by secret ballot in 
their local unions.
    Senator Bond. There are secret ballots?
    Ms. Feldman. Yes. They are elected by secret ballot--I 
believe that is a requirement of the law--in their local 
unions. They come to a congress, and in that congress when they 
vote on certain issues--for example, when they elect the 
officers of the national union--they vote in a roll call vote 
so the members who elected them know how they vote, very much 
the same way as the people of your State know how you vote on 
every issue since they sent you here.
    Senator Bond. Ms. Daugherty, is that the way it works in 
Miami?
    Ms. Daugherty. No, sir. In Miami, there are no secret 
ballots, and there has not been a real election since Pat 
Tornillo took power, and the only person who dared to challenge 
president-for-life Pat Tornillo 20 years ago was a lady named 
Keanu Barriman, who disappeared after challenging Mr. Tornillo.
    The Chairman. How are the delegates chosen to the national 
convention?
    Ms. Daugherty. That, I do not know, sir. I am speaking 
locally, at the local level, to elect the president and the 
officers of the local.
    Ms. Feldman. If there were a violation of that, then 
someone could have done something about it, since the Labor 
Department has rules about that.
    The Chairman. I do not believe the Labor Department has 
jurisdiction in that specific area, because it is a public 
union, isn't it?
    Ms. Feldman. Well, it could be that in Miami it did not 
have jurisdiction. In Washington Teachers Union, it would have, 
depending on whether the local union has private members or 
not. But we expect our locals to have a membership election for 
delegates.
    The Chairman. If you would yield to me for just a second, 
do you audit whether or not the local election of the local 
delegates is done by secret ballot?
    Ms. Feldman. No.
    Senator Bond. Let me just ask one more question. I have a 
commitment and will have to leave.
    There are two things that would trigger some action by the 
AFT. No. 1, you do not get the dues, and number two, you do not 
get the audit. What do you do with the audits and with the 
financial statements? Do you have exercise any supervisory 
authority? Do you have any way of sampling, doing testing to 
assure that these audits have been properly handled and 
disseminated?
    Ms. Feldman. Well, going forward, we intend to do that, 
Senator. We are developing a computerized program which will 
enable us to look at these audits in a disaggregated way, make 
some assumptions which would tell us something about the way 
that the local is operating, for example, depending on the size 
of the local, the percentage of dues spent on staff salaries 
versus travel or conferences. We are developing a program which 
will enable us to do that at a glance.
    We also are having further discussion on our executive 
council, and some of the things we intend to do will require 
convention action because they require constitutional 
amendment, so for example, one of the suggestions that has been 
made at our council is giving us the right to do roving audits 
so that there would be an expectation that there might be an 
audit coming from the national organization. But we have right 
now the right to go in and do an audit where we see something 
that looks wrong to us when the audit comes in.
    Senator Bond. Our staff research indicates that only six of 
the 278 locals listed on your website filed Federal forms. 
Would you support a requirement that local public sector unions 
submit financial disclosure information to the U.S. Department 
of Labor?
    Ms. Feldman. Well, I think they do submit forms to the IRS, 
and many of them submit to their State government. They are 
required to submit their financial statements and information 
similar to what is required on an LM-2 to their States.
    Senator Bond. Is that a ``no''?
    Ms. Feldman. I would say that it is something that we would 
consider, but we have not taken a position on it one way or 
another. But again, we think that there are sufficient 
reporting requirements, and the real problem here is making 
sure that the members take up their right and responsibility in 
a democratic manner to make sure that their local union is 
being governed appropriately.
    Senator Bond. Thank you, Ms. Feldman.
    I thank the witnesses and I thank the chair.
    The Chairman. Senator Reed?
    Senator Reed. Thank you very much, Mr. Chairman, and I 
thank the witnesses for their testimony.
    First, no one can condone criminal activity, and certainly 
this criminal activity has to be criticized strenuously.
    The question before us, though, is whether there are 
systematic problems that we have to address and also, I think 
related to that is whether the interested parties have taken 
steps to try to preclude the recurrence of these events. And I 
think the chairman said that the national AFT has taken steps. 
The question is are they sufficient, or are there more steps 
that need to be taken.
    One issue that you just alluded to is the question I was 
going to raise--all of your unions do file with the IRS; is 
that correct?
    Ms. Feldman. Yes.
    Senator Reed. And those filings are always subject to 
Internal Revenue audits and Internal Revenue laws, etc.
    Ms. Feldman. Yes, they are.
    Senator Reed. So that is another check on the fiduciary 
responsibilities of these people.
    How many unions do you have, Ms. Feldman?
    Ms. Feldman. We have close to 3,000 local unions.
    Senator Reed. And to your knowledge, is there any other 
incidence like this in the last several years other than 
Washington and Miami of this scale?
    Ms. Feldman. We have never had anything like this before in 
our history. The scale--it is mind-boggling what has happened 
in these two locals, and we are doing everything we can first 
of all to correct it because we are disgusted by it, and second 
of all to do everything we can to try to ensure that it never 
happens anywhere else.
    Senator Reed. You mentioned before that you were a local 
union leader in New York City, and you suggested some of the 
things that you were doing. Is it your intention to make those 
practices common throughout the AFT?
    Ms. Feldman. Yes. We developed what we call a local union 
profile, which is a description and in some ways an ability to 
check off the kinds of things that a local, given whatever 
particular size it is, ought to be doing to involve its 
members, to serve its members, and we have a task force at work 
on that to make sure that every local is doing that.
    Senator Reed. Are you systematically looking at the 
governance capability, the ability of elected leaders? It goes 
back to the point that both you and Mr. Donahue made, that 
these are elected leaders. They stand for election, they get 
elected, and just like some of our constituents, people shake 
their heads afterward. But anyway, the point is that you, I 
think, should be engaged in trying to ensure that they have the 
support, both institutionally and otherwise. Are you doing 
that?
    Ms. Feldman. Yes, we are. We are developing--I alluded to 
it briefly in my testimony--we have always done training of 
local leaders, but we are really beefing that up so that they 
understand what their fiduciary responsibilities are, 
especially in the financial area, but also what their 
responsibilities are in terms of making sure that there is 
democracy and democratic involvement of the members.
    I have to say that I listened to Ms. Daugherty, and I know 
that Pat Tornillo was elected over and over again over a period 
of many years, but there were elections held in that local, and 
there was the possibility of opposition organizing itself and 
electing someone else.
    By the way, we have tremendous turnover in many of our 
local unions because of elections, so it is really not all that 
unusual to have an opposition candidate topple even a 
longstanding elected leader. We know right here in the Congress 
of the United States that incumbents generally have an edge, 
but if they are satisfactorily representing their constituents, 
they usually get reelected. If not, if opposition grows, they 
can lose an election, and it is the same way in a union.
    Senator Reed. One of the issues that occurs because of the 
nature of teachers' unions is that we divide responsibilities 
between the Federal Government and the State government with 
respect to responsibility and enforcement. And I am not the 
expert, but if a union has exclusively public employees, and 
generally, they are governed by State rules, State regulations, 
and the States have very zealously guarded that prerogative, 
which raises the issue which, Ms. Daugherty, your testimony and 
your commitment to these issues is commendable. You talked 
about the PERC, the Florida Public Employee Relations 
Commission. I assume that is the agency that really has the 
front line responsibility to police the operations of these 
public unions in Florida. Is that correct, legally?
    Ms. Daugherty. Well, sir, they are responsible for 
collecting the forms on a yearly basis, but I have a letter 
which I could provide to the Senator from their general counsel 
stating that their responsibility is ministerial, they have no 
investigative powers, and they cannot impose sanctions.
    Senator Reed. Now, that is a decision that the State of 
Florida has made.
    Ms. Daugherty. Yes, sir, it is.
    Senator Reed. Who appoints these commissioners, Ms. 
Daugherty?
    Ms. Daugherty. I believe they are appointed by the Governor 
of the State.
    Senator Reed. So Governor Bush appoints these 
commissioners?
    Ms. Daugherty. Some of them have been his appointees; some 
were prior.
    Senator Reed. But he will have the opportunity certainly in 
the next several months, at least.
    And a remedy of this situation would require the Florida 
legislature to enhance the powers of the PERC?
    Ms. Daugherty. Yes, sir, I believe so.
    Senator Reed. And I presume you are also working along 
those lines?
    Ms. Daugherty. Yes, sir.
    Senator Reed. Good. Well, again, this is a situation that 
no one wanted to see develop because no one wants to see the 
abuse of trust that is implicit in these criminal activities. 
The responsibility is to make sure it doesn't happen again, to 
do it systematically, and to do it, I think, in a way that when 
it comes to the teachers unions, the roads lead not just to 
Washington, but in your case to Tallahassee and other places. 
And I would say the way we have organized our response to 
public employees is that we have given the States the lead, and 
I would hope that the State of Florida would step us just as 
vigorously as others might. And I think the steps that you are 
taking are not only commendable, but they are essential, and I 
thank you for that.
    Thank you, Mr. Chairman.
    The Chairman. Thank you.
    I know our witnesses will have to head out, but I think 
Senator Reed has touched on one of the issues here, which is 
that clearly the national unions have a major role in 
oversight, and you attempt to do it, but there is also a public 
role in oversight which the Department of Labor has or the 
State departments of labor have, and as I understand it, only 
12 States presently have laws governing the issues of public 
labor unions and whether they are audited and whether they are 
disclosed. So you have a majority of the States basically not 
in the field of addressing the public unions, and I can 
understand the resistance of public unions to having a Federal 
role, because obviously, nobody wants to get another regulatory 
agency involved.
    But I would be interested, Mr. Donahue, because of your 
great expertise and your background as to why the dichotomy 
between the private and the public unions being governed by the 
Department of Labor? Why shouldn't all unions be under the 
Department of Labor for reporting requirements? Why should 
public unions be exempted? Is there a logic to that that is 
historical?
    Mr. Donahue. Well, it is more than historical; I suspect it 
is constitutional, Mr. Chairman. The essential interest of the 
Federal Government in regulating trade unions in 1935 was if 
they were engaged in interstate commerce, so the National Labor 
Relations Act will only apply in those circumstances and does 
not apply in intrastate commerce.
    Similarly, when the Labor-Management Reporting and 
Disclosure Act was formed, and when the WPPDA, the Welfare 
Pension Plan Disclosure Act was developed in the late fifties, 
they focused on private sector unions which were in a sense 
operating with some degree of government sanction, approval, 
whatever.
    I think it is terribly important to note that unions are 
independent creatures. They are not creatures of the State, and 
the State needs to be very careful--the ``State'' meaning the 
Federal Government in that sense--needs to be very careful as 
to how far it wants to encroach on the operation of an 
independent citizen organization. We do not regulate lots of 
other organizations. We do not regulate the VFW and the Moose 
and the Eagles and so forth. We regulate trade unions because 
of the connection to the job and the connection to the Federal 
supervision of the establishment of collective bargaining 
rights, and I think that is the basis for the exclusion of the 
public employee unions, and I think it is an appropriate one.
    Second, as Senator Reed was pointing out, the States have 
an interest which they very jealously guard in the 
relationships with the unions within the State, the unions 
which represent State employees or school employees or 
whatever. And that may be the place where supervision should be 
exercised if it is not, but that is beyond the authority of the 
Congress, I would think.
    The Chairman. This has been a good hearing, and I 
appreciate all the testimony.
    I would say there are few things that did come out of this 
that I am interested in pursuing. I am obviously specifically 
interested in pursuing whether there is a systematized approach 
that is going to work to disclosure and transparency and how we 
can tighten that up and make it more logical and more 
effective.
    Along those lines, I was interested to note your concerns 
about the cost that this new compliance is going to put on 
unions--$1 billion of new cost is your estimate; the Labor 
Department's is significantly less. Clearly, $1 billion is a 
ridiculous number, and $96 per union employee seems rather 
high, too.
    So I would be interested in getting to the bottom of that 
question, quite honestly, and we will try to get some answers 
to that, although I do think we ought to give the Department 
time to digest the 36,000 items of comment that they have 
received, and hopefully, that will cause them to adjust where 
they see those comments to be appropriate.
    But I thank you all for your testimony and for taking the 
time to come here. It has not only been very valuable; it has 
been good to get a public airing of some of these issues, 
because the integrity of the union process is critical. It is a 
very important element of our society, and the maintenance of a 
free society is to have transparency in a lot of areas, but 
especially in areas where you have fiduciary responsibility, 
like unions.
    So thank you very much, and we will keep the record open 
for comments.
    We are adjourned.
    [Additional material follows.]

                          ADDITIONAL MATERIAL

                   Prepared Statement of Lary F. Yud

    Mr. Chairman and Members of the Committee: I am pleased to appear 
before the Committee today to discuss the Department of Labor's 
administration and enforcement of the Labor Management Reporting and 
Disclosure Act (tLMRDA), also known as the Landrum-Griffin Act.
    I understand that the Committee is interested in particular in 
matters involving the Washington Teachers Union (WTU) and the United 
Teachers of Dade (UTD). As the Committee is aware, the Washington 
Teachers Union is the subject of an investigation under the auspices of 
the United States Attorney for the District of Columbia and the Office 
of Labor-Management Standards is actively involved in this 
investigation. In view of this pending investigation, it would be 
inappropriate for me to discuss specific issues concerning that case. 
At this time our agency is not involved in any investigation involving 
the United Teachers of Dade.
    We all share the public's interest in the effective enforcement of 
the LMRDA, both as a general matter and in connection with the WTU 
case. I can assure you that the Department of Labor will assist the 
U.S. Attorney's Office in every possible way to see that all 
appropriate action is successfully undertaken.
    Although I cannot discuss the current case involving the Washington 
Teachers Union, I can provide a general overview of the LMRDA, which is 
centered on two fundamental goals--promoting union democracy and 
ensuring; union financial integrity.
    The Office of Labor-Management Standards (OLMS) administers and 
enforces the provisions of the LMRDA that are within the jurisdiction 
of the Department of Labor. These include civil and criminal provisions 
that provide standards for union democracy and protect the financial 
integrity of labor organizations that represent private sector 
employees. OLMS also administers and enforces provisions of the Civil 
Service Reform Act of 1978 and the Foreign Service Act of 1980, which 
apply similar standards to federal sector unions.
    The rights of union members and important union responsibilities 
are set forth in five Titles of the LMRDA.
    Title I of the LMRDA creates a ``bill of rights'' for union 
members. Every union member has an equal right to nominate candidates 
for union office, to vote in union elections, and to attend and 
participate in union meetings. Title I provides that unions may impose 
assessments and raise dues only by democratic procedures, and contains 
safeguards against improper disciplinary action by unions. Title I also 
requires that every labor Organization inform its members about the 
provisions of the LMRDA and establishes the right of members and 
employees to copies of collective bargaining agreements.
    Title II of the LMRDA requires reports from unions, union officers 
and employees, employers, labor relations consultants, and surety 
companies. The Department of Labor has authority to enforce these 
reporting requirements and the LMRDA-provides for the public disclosure 
of the reports. In addition, members leave the right to examine union 
financial records, but only by demonstrating just cause. While the 
statute gives a union member the right to sue in federal court to 
enforce that right, neither records nor attorneys fees are available if 
the court does not agree that just cause has been demonstrated.
    Over the past year the Department has taken a number of important 
steps to improve administration of the LMRDA reporting requirements. In 
January 2002, OLMS began distributing to labor organizations a free CD-
ROM containing a computer software program that they can use to 
electronically complete the annual financial reports they are required 
to file. Those reports can now be submitted over the Internet.
    In June 2002, OLMS began making these annual financial reports, and 
more recently the reports of employers and labor relations consultants, 
available for public disclosure on the Internet. All of these reports 
for the year 2000 and later can now be examined from any computer with 
access to the Internet and printed free of charge. Copies of earlier 
reports and of union constitutions and bylaws can be ordered from OLMS 
over the Internet. Since the activation of the Internet Disclosure site 
in June 2002, there have been a half million visits to the home page of 
the site.
    In December 2002, the Department published a Notice of Proposed 
Rulemaking to substantially revise the Form LM-2, the annual reporting 
form used by the largest unions, and to revise, although less 
significantly, the Forms, LM-3, and LM-4, which are used by smaller 
unions. Approximately 20 percent of all unions are required to file LM-
2 reports. The new forms will provide union members, Congress, and 
other interested parties with more information about the financial 
activities of unions, including information about trusts operated for 
the benefit of the members. These reporting improvements will give 
union members information they need to engage in effective self-
governance and the enhanced detail and disclosure will also discourage 
financial mismanagement and embezzlement. The Department is currently 
reviewing the comments received on its Notice of Proposed Rule Making.
    Finally, with respect to LMRDA reports, OLMS is in the process of 
implementing an electronic report auditing program. This program will 
electronically audit every labor organization annual financial report 
to ensure that certain minimum reporting standards are met. The program 
will highlight possible reporting deficiencies that the agency can deal 
with through a variety of means such as providing the filing union with 
an advisory letter, seeking an amended report, or taking other 
appropriate action.
    Title III of the LMRDA governs trusteeships imposed by a parent 
union over a subordinate body. Under Title III, a parent union may 
impose a trusteeship only for certain, legitimate purposes, for 
example, to correct financial malpractice or to assure the performance 
of a collective bargaining agreement. Title III is enforceable by the 
Department of Labor, on the written complaint of a union member.
    Title IV of the LMRDA governs the election of union officers. It 
requires that elections be held periodically--at least every three 
years for local unions, at least every four years for intermediate 
bodies and at least every five years for national and international 
unions. It also creates election-related rights and safeguards. For 
example, all members in good standing have the right to vote and be 
candidates, subject only to reasonable rules uniformly imposed. 
Further, subject to certain time limits and a requirement to pursue 
internal remedies first, union members may file complaints with the 
Department protesting violations of any provision of Title IV. The 
Department must investigate such complaints, and take action to remedy 
material violations, within 60 days.
    Finally, Title V of the LMRDA establishes financial safeguards for 
unions. It imposes fiduciary responsibilities on labor union officials. 
A union officer or employee who embezzles or otherwise misappropriates 
union funds or assets commits a federal crime that is punishable by 
fine or imprisonment. Title V establishes bonding requirements for 
union officers and employees, and prohibits persons convicted of 
certain crimes from holding union office or employment for up to 13 
years after conviction or the end of imprisonment.
    In the last five fiscal years (FY 1998 to FY 2002), OLMS has: 
conducted 752 election investigations and supervised 173 elections; 
completed 75 trusteeship cases; and conducted 1,994 criminal 
investigations, primarily involving the embezzlement of union assets 
and related reporting violations. During this period, the Department's 
investigative efforts resulted in 726 criminal indictments and 639 
convictions, or approximately 11 convictions per month.
    In addition to these enforcement activities. OLMS carries out an 
extensive program of compliance assistance, beginning with offers of 
assistance in understanding and complying with the law to all officers 
of newly formed unions. OLMS publishes a wide variety of compliance 
assistance materials, and every OLMS field office has an active program 
of compliance assistance seminars. Much of the focus of this assistance 
is on the statutory reporting requirements.
    Unfortunately, because of a significant decline in staff resources, 
the agency has had to significantly curtail its discretionary program 
to audit local and national unions and focus on mandatory activities 
such as election investigations and criminal referrals. The agency 
implemented its Compliance Audit Program in the early 1980's following 
a recommendation by the General Accounting Office that was critical of 
the agency for not conducting sufficient onsite reviews directed to 
enforcement of the LMRDA. In response to the GAO's recommendation, OLMS 
designed a streamlined investigative audit program designed to detect 
civil and criminal violation. The audits have the additional advantage 
of providing direct hands-on compliance assistance to union officials 
and employees.
    However, between FY 1990 and FY 2002, the agency's staff resources 
declined nearly 40 percent, leaving it with insufficient resources to 
manage an effective audit program. Thus, for example, over the past 
five years, the OLMS Washington District Office, which is ?responsible 
for nearly 1,500 reporting unions in Maryland, the District of 
Columbia, and Virginia, has been able to conduct only an average of 
three audits a year. The agency's program to audit international unions 
has buffered a similar fate. The agency has been able to conduct on 
average only one audit a year of a national or international union over 
the past five years. Although the program is nearly 20 years old, ten 
of the twenty-five largest unions have never been audited by OLMS.
    Both audits and investigations are often resource intensive. An 
audit of a large national union can require the equivalent of three to 
four staff years. Similarly, a large embezzlement case may require a 
number of investigators be devoted full-time to the case for many 
months. At its FY 2002 authorized staffing level, OLMS had only 138 
investigators located in 20 District Offices and 18 other sub offices 
(usually one or two person stations) spread throughout the country. 
After completing mandatory election casework and the most pressing 
embezzlement cases, these investigators have very little time to devote 
to audits designed to detect and deter other violations.
    When OLMS is able to conduct an audit, our investigators and 
auditors perform a number of mandatory and optional steps designed to 
detect even well disguised misappropriations of funds. Records of banks 
and other financial institutions are obtained and other third-party 
checks are conducted to verify entries on union records. In the case of 
one large international union, an OLMS audit uncovered an embezzlement 
of over $350,000 that for many years had gone undetected by the union's 
own external auditor.
    On a bright note, the President and Congress have begun to rectify 
this lack of effective oversight. In the recently enacted FY 2003 
budget, OLMS was authorized to increase its staff. That increase will 
enable the agency to begin to build back its audit program, as well as 
to increase its compliance assistance activities designed to help union 
officers, employees, and members understand the law and take steps to 
place themselves into compliance.
    Thank you for giving me the opportunity to discuss this important 
program. I would be pleased to answer your questions, subject only to 
the constraints by which the Department feels bound in light of the 
pending investigation.

                  Prepared Statement of Sandra Feldman

    Thank you, Chairman Gregg and the members of this committee, for 
the opportunity to testify about the apparent--and appalling misuse of 
funds and abuse of trust we have experienced in our union.
    I want to talk, as clearly and concisely as I can, about the steps 
the American Federation of Teachers has taken to correct this problem, 
and to do our very best to ensure that nothing like what happened ever 
happens again.
    I am sickened and infuriated by this apparent massive misuse of 
union funds, of the betrayal of members' trust; even more so, if that's 
possible, because of what public education and teacher unionism mean to 
me.
    I grew up in a Coney Island slum and then in a public housing 
project in Brooklyn, NY.
    It was public education--from kindergarten through college--that 
made a successful life possible for me.
    After becoming the first in my family to earn a college degree, I 
became a public school teacher. I worked in a school on Manhattan's 
Lower East Side where the students came from a housing project, and had 
problems similar to what I and the kids I grew up with had experienced.
    While in college, I had been active in the civil rights movement 
and worked with leaders like A. Philip Randolph and Bayard Rustin, who 
took the time to mentor me and so many other young idealists.
    When I started teaching, I joined the union for the same reasons, 
to fight for the things the children needed--from smaller class sizes 
to better curricula, and for what I needed as a teacher: professional 
voice, better training, a decent wage.
    That's how our union was founded in New York City. First by the 
hundreds and then by the thousands, teachers joined the union to win 
the resources and respect they needed to do their best work.
    Mine was Local 2 of the AFT. Local 1 was founded in Chicago at the 
turn of the last century, long before anyone thought seriously about 
collective bargaining for teachers.
    It was organized under the leadership of Margaret Haley, a sixth-
grade teacher who started fighting for women's rights long before women 
had ever won the right to vote. Her organization of teachers into a 
labor union was a logical extension of that fight.
    The classroom teachers--the great majority of whom were (and still 
are) women who fervently believed in their mission as educators and 
fought as fiercely for the children as for themselves. They were joined 
by teachers from New York, Philadelphia, Detroit--yes, Washington, 
D.C.--and other major cities, and the AFT began to grow.
    I've taken the time to talk about our history because it has been 
about idealism. Corruption has never been part of our past; and I can 
assure you I will continue to do everything in my power to see to it 
that it won't be part of our future.
    To that end, we have just taken a series of important steps to 
increase fiscal oversight of locals. I'll describe them shortly.
    But I also want you to understand that at the heart of our history 
and our heritage is an intense commitment to the independence of our 
local unions.
    The fiercely independent women (and men) who founded our local 
unions were determined to run their own affairs. They didn't want to be 
dominated or dictated to by school administrators or even by the 
American Federation of Labor.
    That is why, when they affiliated, city by city, and local by 
local, with a national union, it was the American Federation of 
Teachers, with the accent on the word ``Federation.''
    In the AFT, to this very day, we have a tradition of strong local 
unions, with complete autonomy--from electing officers, to setting 
policies, to setting their own local dues and making their own budget, 
and bargaining, ratifying and enforcing collective bargaining 
agreements.
    This also closely tracks the strong tradition of local control in 
our public school systems. Just as local school districts are fiercely 
proud and protective of their local cultures, so are our local unions. 
That's one of the things, by the way, that makes the No Child Left 
Behind Act so daring--and so difficult to implement. (A few states have 
threatened to turn back federal funds rather than have local school 
districts forced to do certain things.)
    It's also important to understand that unlike some unions, the AFT 
doesn't deal with national employers. It's our local unions that 
negotiate and administer the union contracts with the local boards of 
education.
    Over the years, we've built a strong national union, but it doesn't 
run locals. It exists for mutual self-help, to address national 
concerns, and to conduct research on and advocate for education 
improvements and other issues of importance to our members and the 
people they serve. We provide our local and state affiliates with a 
great deal of professional support. We worked with both the Washington, 
D.C., and Miami-Dade locals, for example, on turning around low-
performing schools, providing professional development in the teaching 
of reading, and more.
    My legendary predecessor Albert Shanker was known nationally as a 
leader for standards and accountability in our schools. But even he was 
criticized for not bringing all our local unions along, all the time. 
When it came to convincing local unions, even Al Shanker had to use the 
power of persuasion, not the persuasion of power.
    But persuasion can work. For example, almost all of our local 
unions are now on the same page regarding many education improvements, 
such as how best to teach reading, an area in which the AFT has taken a 
leadership role.
    In fact, President Bush and Secretary Paige have recognized the 
AFT's leadership on this issue, and the Department of Education is 
working with us, as did the previous administration, to help provide 
the nation's teachers with solid, research-based approaches to teaching 
reading. And we have worked with many of you in carrying out our belief 
that teacher unionism can be--and must be--a force for improvement for 
our students, our schools and our educators. In the AFT, we have prided 
ourselves on being a union of professionals.
    So how did things go so terribly wrong in two of our locals? How 
can we set things right and prevent them from ever happening again?
    I am constantly asking myself: Could we have seen the warning signs 
sooner? Even if we had, with hindsight--always 20/20--could we have 
done more?
    As I've said, the AFT consists of fiercely autonomous local 
unions--almost 3,000, ranging in size from two or three in an island 
community to 115,000 in New York City. 2,748 locals have fewer than 
1,000 members each. Our Constitution--and our procedures and 
practices--reflect our tradition of local autonomy.
    Yes, our Constitution requires that local unions prepare audits at 
least every two years, make them available to their members, and submit 
a copy to the national office. But, we have had no enforcement 
provisions because neither our history nor our experience indicated 
that they were needed. Instead, we've had to rely on persuasion. In 
fact, unlike many unions, for almost all of our history we prided 
ourselves on not having a constitutional provision for 
administratorships--relying on our locals to involve the members 
democratically and conduct themselves with integrity. And through the 
years, we never had a problem like the one we're now facing.
    Only in the year 2000, after going through an extensive strategic 
planning process to prepare for the future, did we amend our 
Constitution to allow for administratorships should extreme 
circumstances arise, such as those that later did occur in Washington 
and Miami--and I'm certainly glad we did.
    You will recall that the situation here in Washington came to light 
because the AFT discovered it, and brought it to the attention of the 
appropriate authorities. We never covered it up. In fact, we reported 
on it extensively in our national union newspaper and on our Web site.
    Although our office repeatedly had sought copies of audits from the 
president of the WTU and the payment of back dues, we first discovered 
that something was seriously wrong last summer when teachers alerted 
the AFT national office about an overcharge in the automatic dues 
deduction. With the cooperation of the WTU executive board, we sent in 
the AFT's financial services department, which soon found several 
serious irregular transactions, including checks and credit card 
purchases without proper authorization.
    Again, with the involvement and support of the local's executive 
board, we notified the U.S. Attorney's Office, which began 
investigating the WTU, with the full cooperation of the AFT. The local 
executive board asked for the resignations of the officers allegedly 
involved, and the AFT hired a forensic auditor who ultimately reported 
the misappropriation of some $5 million. All the excruciatingly painful 
details you have read about came directly from our forensic audit, 
which we promptly provided to all the AFT members and made public.
    In January, the AFT executive council voted unanimously to appoint 
an administrator to run the day-to-day operations of the WTU. We 
appointed George Springer, an experienced educator and unionist who 
once headed the AFT state federation in Connecticut.
    The case in Miami first came to our attention in a different 
manner. There, we had no knowledge of any alleged wrongdoing by the 
local's president until the FBI raided the union's headquarters on 
April 29.
    Nor did we learn that the local was having serious financial 
problems--primarily due to the combination of cost overruns in the 
construction of a new building and a decline in membership--until 
representatives of UTD came to us last January, requesting that we 
guarantee a large loan. That guarantee was never given because they 
failed to provide satisfactory answers to our questions about their 
fiscal situation.
    Over the years, the Miami local's audits--conducted by a reputable 
national accounting firm--had never indicated that there were financial 
problems, until a problem appeared on the very last audit, conducted by 
a local accounting firm and submitted in March of this year.
    As in Washington, once aware of potential financial mismanagement, 
we moved into that local immediately, appointing Mark Richard--a 
nationally known labor lawyer and Miami law professor--as the AFT's 
administrator.
    Both Mr. Springer in Washington and Mr. Richard in Miami-Dade are 
meeting regularly with their teachers, getting their local's finances 
in order, and doing everything it takes to turn these unions around, 
rebuild their democratic processes and return the locals to the 
members.
    Meanwhile, on the national level, as I previously noted, we have 
created much stronger procedures to help prevent or detect possible 
corruption in a union with almost 3,000 separate and autonomous local 
unions within an education system where local control is paramount. Let 
me briefly describe them.
    First, under our new rules, if a required audit or financial review 
isn't submitted to us within six months of the close of the local's 
fiscal year, the national AFT president is authorized to employ an 
auditor to review the local's finances, inform the local's members 
immediately, and report the results to the members and to the AFT 
executive council.
    In addition, because one sign that a local might be having 
financial difficulties for any reason is if it falls significantly and 
unaccountably behind on its dues payments to the AFT, our executive 
council strengthened the procedure for dealing with late payments.
    Under our new rules, any local that becomes two months behind in 
its payments will receive notification in writing. If the situation 
isn't corrected within 30 days, the AFT will directly notify the 
local's executive board and state affiliate. If the payments are not 
made within 30 days from that point, we will communicate directly with 
the members of that local. And when a local is in bad standing because 
of late dues payments, the president is authorized to send in an 
auditor to examine the books. So for the first time, we can now 
directly inform a local's members of a potential problem, and we have a 
streamlined mechanism to employ our own auditor. Members' knowledge and 
involvement are, perhaps, the strongest weapons we have.
    What has happened in these two locals is a tragedy, but it is also 
what educators call ``a teachable moment.'' As I mentioned, our 
newspapers and Web site have kept our members and leadership throughout 
the country informed about these situations. The Web site is carrying 
WTU's full forensic audit, along with our own AFT financial statement 
audited by an independent firm. A similar forensic audit will be 
completed and posted for Miami within months.
    We are developing additional training programs for local union 
presidents, treasurers and other officers in financial management, 
recordkeeping and reporting.
    I am determined--out of outrage and belief--to guard our historic 
mission: to nurture the open, honest, democratic union that the AFT has 
always been, which gives voice to teachers' aspirations to improve 
education for all of America's children, for the good of our 
communities and our country.
    Thank you for listening. And now I would be glad to answer your 
questions.

                   Prepared Statement of Tom Donahue

    Chairman Gregg, Senator Kennedy, and committee members, thank you 
for inviting me to speak with you today.
    Let me start by telling you briefly about my background and my 
experiences with labor unions. I am a senior fellow of the Work in 
America Institute, a nonprofit organization dedicated to improving U.S. 
productivity and the quality of working life. I also serve as chairman 
of the Special Advisory Committee to the President and the Secretary of 
State on Labor Diplomacy.
    I served in government--as an assistant secretary for labor-
management relations at the U.S. Department of Labor from 1967 to 1969. 
I served as chairman of the U.S. Special Trade Representative's Labor 
Advisory Committee during Republican and Democratic administrations.
    From 1979 to 1995, I was the secretary-treasurer of the AFL-CIO, 
and I was elected president in August 1995 to complete an unexpired 
term.
    I believe these experiences give me a unique perspective.
    I have tremendous respect for the American Federation of Teachers 
and for its current president, Sandra Feldman. I hold the AFT in 
highest regard because it is a primary reason why today's teachers have 
greater professional development opportunities and why all 50 states 
have academic standards in place. The AFT is working hard to do what it 
can to raise academic achievement for all children and to give its 
members the tools and support they need to achieve that goal.
    As assistant secretary of labor and an officer of the AFL-CIO, I 
worked with unions of all kinds. Union members, like American voters, 
elect their officials at the local, state and national levels in fair 
and free elections. In this way, unions are exemplary democratic 
institutions.
    The national unions, which may have hundreds or thousands of local 
affiliates across the country, while also democratic, do not all have 
the same form of democracy. Some, such as the United Auto Workers and 
the United Steelworkers of America, are highly centralized, with a 
great deal of authority and responsibility in the hands of national 
officers and staff. That makes sense in industries that have so many 
workers concentrated in a few main industrial centers, such as Detroit 
or Pittsburgh.
    Other national unions, like the AFT, encompass democracy in a 
different form. The AFT is, by design and tradition, decentralized. 
Teachers are employed by school districts across the country, and it 
makes sense that teachers would be in a federation, which affords local 
independence and responsiveness to local issues. The national union has 
limited oversight and is cautious about interfering in the affairs of 
its local unions, which have a great deal of autonomy. Since the AFT's 
founding more than 80 years ago, that approach has worked superbly for 
the AFT national union, for its locals, and, most important, for its 
members. We are here today to talk about the exceptions, but it's 
important to remember that the overwhelming majority of AFT locals 
operate democratically, under leaders who possess integrity, expertise 
and a commitment to member service.
    It was the national AFT's audit that uncovered the misappropriated 
funds at the Washington Teachers Union. Let me suggest that the way to 
judge a national union--and I have a lifetime of experience with 
unions--is not by the despicable actions of a few individuals at one or 
two of its locals. Rather, we should judge the character of the AFT and 
its president by their response to these actions, and the AFT has 
responded well.
    Ms. Feldman and her staff moved quickly to bring in federal 
authorities, protect Washington's teachers and their organization from 
financial disaster, and put in place George Springer as administrator. 
He has been a schoolteacher, a local teacher union president, president 
of the AFT's Connecticut affiliate, and northeast regional director of 
the AFT.
    I am confident Mr. Springer will put the WTU back on its feet. I 
know that he already has taken steps in that direction. It will take 
some time to undo the damage that has been done, but the AFT's goal is 
to make this local an exemplary union, regain the confidence of the 
members and the school community, and, ultimately, rebuild the WTU so 
that it can be a well-run, member-driven, democratic organization.
    The AFT is also taking aggressive actions in Florida to straighten 
out the problems at its Dade County local. AFT installed Mark Richard 
as administrator of that local, and his team is working to turn around 
that union. He is a labor lawyer, president of the higher education 
local at an AFT affiliate in south Florida, and, perhaps most 
important, a person with strong family ties to Miami's public schools.
    AFT has selected highly qualified, knowledgeable administrators in 
both cases. What's more, its executive council has approved several 
measures to strengthen accountability, particularly for affiliates that 
fall behind in their dues to the national union. The union's president 
can now order, an external has fallen behind in its dues or failed to 
submit a biennial audit of its finances.. And' the AFT has established 
new procedures for notifying affiliates that show signs of financial 
trouble.
    That is the way to solve these problems, and Ms. Feldman spoke at 
some length about the steps the AFT is taking to prevent this kind of 
fraud--unprecedented in AFT's 80-plus years--from occurring again.
    There are people, including some officials at the U.S. Department 
of Labor and others who have spoken here today, who believe that what 
is needed is not the direct, decisive types of action taken by the AFT, 
but more reporting from unions. I disagree with that approach.
    The proposed changes to union disclosure forms under the LRMDA 
would not lead to greater transparency or help avoid the rare instances 
of financial impropriety. If these proposed changes would achieve that 
end, I can tell you that right now I would be sitting here saying, 
``Sign me up.'' And I know that Sandra Feldman and other union leaders 
also would welcome that change, even if it required additional effort 
from union staff.
    But sadly, there is absolutely nothing in these changes that will 
offer additional transparency to assist union members. Indeed, the 
current version of the LM-2s requires unions to disclose staff salaries 
and detailed categorical spending--more disclosure than is required of 
other nonprofit organizations and corporations. This requires rigorous 
and detailed recordkeeping by unions--a task they perform and have 
performed for many years.
    And these proposed changes do not give members the right under the 
LMRDA to obtain financial information from the unions: Unions and the 
law already give members that right. They can get the financial 
information simply by asking for it. Many unions go even a step further 
by making their audits public. Union audits are often published on Web 
sites. They are discussed at meetings that the membership is free to 
attend. Members can attend meetings where the union's budget is voted 
on.
    In contrast, the proposed reporting changes will not increase 
transparency; they will not prevent the rare instances of financial 
impropriety; and they will not give union members rights they don't 
already possess. They will, however, as a detailed study by the Air 
Line Pilots Association estimates, result in 15,863 pages of data that 
will not help workers learn about their unions' spending. What this 
arbitrary requirement will mean is that more union dues will be used 
for accountants and support staff, and more time will be spent filling 
out meaningless paperwork instead of serving members. If the goal is to 
help members understand their unions' finances, then this data dump of 
thousands of pages is not the answer.
    The new rules would require unions to itemize each and every 
payment that crosses a low threshold (proposed in the range of $2,000 
to $5,000) and to allocate the costs to one of eight ``functional'' 
categories. These rules apply even if several small payments--added 
together--would cross the low threshold. For example, unions would have 
to track and report five payments of $1,000 each to a printer for 
organizing leaflets. If the monthly bill to the printer is $10,000--
half for organizing materials and half for grievance handling--the 
union would have to allocate and itemize these payments in separate 
categories.
    Unions would have to include a description of the payment as well 
as its purpose. This would reveal a host of sensitive decisions that 
could easily jeopardize the union's bargaining and organizing 
strategies.
    And if an employee receives at least $10,000 per year, the union 
must analyze the employees' hours and estimate to the nearest 10 
percent which category the hours belong in. Unions also would have to 
itemize--by days past due--accounts payable and receivable over $1,000. 
I have a feeling we would need a ninth category--to cover the hours 
that union employees would spend trying to comply with the new 
regulations.
    The list of new regulations goes on and on and never gets us any 
closer to the kind of information that members need. The AFL-CIO has 
estimated that the average cost to each national or international union 
would be more than $1.2 million, and the average cost to each local 
would be $218,000. The Department's own feasibility study shows that 
the largest union would have to report at least 150,000 disbursements; 
it would take 25,000 pages to report on the appropriate schedules.
    Tracking the day-to-day activities and small expenditures would be 
a time-consuming, mind-numbing, pointless task. The only worse task I 
can imagine would be poring over the forms and trying to monitor the 
accuracy of the information for workers at more than 30,000 unions. 
Workers at the U.S. Department of Labor would not have time to even 
skim these disclosure forms.
    If these measures would eliminate, or greatly reduce, the 
possibility of fraud or embezzlement, again I think I could speak for 
all labor leaders in saying we would find a way to make them work. But 
the proposed changes wouldn't accomplish that. No union member is going 
to slog through 15,000 pages of financial statements, and, even more 
important, the changes won't do anything to stop misappropriations if 
the people filling out the forms are intent on defrauding the union.
    I know that there are well-intentioned people who believe that the 
proposed changes to the LM-2 are improvements. But when I look at these 
so-called reforms--through the eye of someone who has been an official 
both at the Labor Department and at a labor union--I see the new LM-2s 
are simply not the answer. Real reform is a positive concept that 
unions welcome; these changes are a negative force that will harm 
workers' rights.
    It's not clear to me that positive reform was on the minds of some 
of the people behind the proposed changes. I don't believe these 
changes would help teachers and other working men and women get better 
representation through unions. In fact, the revised LM-2s would bury 
unions in a pile of paperwork and weaken their ability to serve their 
members.
    Whether the proposed changes come from the best intentions or the 
worst, their effect would be the same--more money to cover 
administrative and accounting functions; less money spent for what 
workers really need.
    The AFL-CIO has proposed a much more promising idea to make sure 
members have all the information they need about their unions' 
operations: annual independent audits to supplement the current LM-2 
forms. Union members don't want to be overwhelmed by the minutiae; they 
want to know their money is being spent to improve the lives of 
members, their families, and the people they serve. With audits that 
conform to generally accepted accounting practices, unions can achieve 
greater transparency. Audits can also be tailored to take an in-depth 
look at particular types of transactions.
    There would still be issues to work out--for example, whether the 
threshold for LM-2 reporting would need to be raised to protect small 
LM-2 filers from the financial burdens of conducting an audit, and 
whether small LM-2 filers should be subject to a review of their 
financial statements by an independent auditor in lieu of having the 
auditor conduct a full-fledged audit.
    But for large organizations, an annual audit requirement is the 
best method of achieving financial transparency and deterring fraud. 
Congress, federal government agencies, corporate watchdogs and scholars 
within the financial accounting world have long recognized that audits 
provide the best way to monitor an entity's financial health.
    America's workers have rights under current law to make sure their 
union dues are well spent. The AFT and the AFL-CIO are taking steps to 
expand those rights, improve communications with members, and help 
members evaluate their union's financial health. That's what workers 
need.
    And make no mistake: Americans need unions that aren't hogtied by 
bizarre accounting regulations. This country needs unions that are 
allowed to focus on what they do best and what their members pay them 
to do: negotiate better working conditions, improve the institutions in 
which their members work, and raise the living standards of American 
workers and American families.
    Thank you.

                Prepared Statement of Damaris Daugherty

    I am Damaris Perez Daugherty, wife of a public school teacher and 
mother of two Miami public school children. I am also Executive 
Director of the Teacher Rights Advocacy Coalition (TRAC) of Miami-Dade 
County, Florida. TRAC is a professional organization dedicated to 
empowering educators and elevating their status. We are fighting to 
expose unbridled corruption in our school district and bring about 
accountability. Unlike the local teacher union--the United Teachers of 
Dade (UTD), we are an open and democratic organization where each 
member has a voice and a vote.
    I respectfully ask you to consider one question: ``Would you feel 
comfortable having a fox guarding a hen house?''
    While unions have undoubtedly achieved important goals and helped 
make America a more just and equitable society, in recent times, some 
unions have lost their focus and have allowed their executives to 
enrich themselves at the expense of the individuals they represent. 
Some unions seem determined to push their own political agenda, which 
sometimes collide with the true interests of their members. Some unions 
have eroded workers' Right of Free Speech, Freedom of Association and 
the Right to Counsel. Those unions have stepped over the line and now 
it is time to make them answer to the workers.
    A well-publicized example of a union run amuck is our own UTD. LTD 
was formed 40+ years ago. Since its inception, President-for-Life, Pat 
Tornillo assumed power and there has never been a bona fide election to 
fill the slate of UTD officers. The collective bargaining unit 
represented by UTD consists of approximately 36,000 teachers, 
substitutes, office workers, social workers, counselors, occupational 
therapists, physical therapists and security monitors. In September of 
2001, UTD represented close to 48% of the members in the bargaining 
unit or 17,000 employees. Today, based on their latest filing with the 
Florida Public Employees Relations Commission and data received from 
the Miami-Dade County Public School District, TRAC calculates UTD 
represents approximately 31% of the members in the bargaining unit or 
just shy of 11,000. (It is close to impossible to provide numbers with 
100% accuracy since UTD will not reveal them even to its own members.) 
Since the FBI raid on April 29, 2003, when evidence of corruption was 
made public, UTD has seen it membership drop by 500 members.
    For many years, there have been widespread rumors concerning 
corruption within UTD. Those rumors, while-credible, had not been 
proven--until now. TRAC has documented and made public complete fiscal 
irresponsibility and questionable practices within UTD for over two 
years. Yet, no one took action until the FBI intervened. There are 
numerous local entities that could have exposed the corruption much 
sooner or could have called for an investigation but everyone chose to 
look the other way. Tornillo has his powerful tentacles everywhere 
throughout the State of Florida and many justifiably fear or owe him. 
While the stench of corruption, graft, nepotism and embezzlement was 
burning the noses and throats of our citizens, the appropriate powers 
were handing out snuff.
    Teachers in Miami-Dade pay the highest dues in the nation--$843 a 
year. For the past 10 years, our teachers have seen their dues rise 
every single year, while pay has been stagnate and benefits have taken 
a nose dive. During this same time, Tornillo and other UTD officers 
were living the high life. As a result of the FBI raid and subsequent 
investigations by local media sources, we now have confirmed Tornillo 
took vacations halfway around the world, enjoyed spa treatments, bought 
liquor, paid for his personal maid and bought his personal groceries 
using teachers' dues monies. Tornillo enjoyed all these ``little'' 
perks on top of his quarter of a million dollar salary, $42,000 
unverified expense account and generous benefits package. This he did 
unchallenged by any member of the UTD executive board, the same board 
that remains in power today. Why would UTD board members challenge him, 
when they too were enjoying similar ``benefits'' such as Golden 
Parachute Packages? The UTD Executive Board was turning a blind eye to 
the misappropriation of funds at the same.time UTD was telling teachers 
in Miami-Dade to apply for Medicare to insure their children because 
UTD could not negotiate healthcare coverage that was affordable on a 
teacher's salary. As members of the bargaining unit looked for 
alternatives to insure their families, UTD and UTD's state affiliate, 
the Florida Educators Association (FEA) paid 100% of the healthcare 
premiums for staff and dependents using dues monies. FEA staff was not 
putting their children on Medicare, rather their families enjoyed a 
$20,300 a year healthcare and dental insurance benefit, all at 
teachers' expense.
    To add insult to injury, during this same period, UTD was engaged 
in conduct contrary to the interests of teachers and to the American 
spirit. On page 159 of UTD's contract with the district, they waived 
the right to counsel for every member of the bargaining unit. Why would 
an organization that is well compensated to fight for worker's rights, 
waive a Constitutional right? Is the waiver of such a fundamental right 
even valid? As if this were not enough and to ensure his continued 
reign, on September 5, 2002, Tornillo spent approximately $14,000 
mailing letters to every member of the bargaining unit. On the second 
page of that letter, the last bullet point tells educators that the 
best way to win an election is never to hold one... so much for the 
American way. As a further insult, UTD also sought to enrich itself at 
the expense of the people it represents by getting into the charter 
school movement. UTD created a conflict of interest by pressing the 
Miami-Dade School Board to give it a discount on the administrative fee 
other charters have to pay. The administrative fee ensures that the 
cost to the district to manage charters, that are turning a profit, 
does not deplete the public education coffers. While other charter 
schools in Miami pay a 5% fee, UTD negotiated a 1% fee for itself based 
on its connections within the district. It cared nothing about the 
negative impact this would have on the district's funds from which its 
members are compensated. UTD is not looking out for members; UTD is 
looking out for UTD.
    In some unions, financial data is so guarded it is next to 
impossible for members to uncover fiscal irresponsibility and 
malfeasance. Current mandated reporting requirements do not remedy this 
problem. At the state level, reporting laws are outdated, forms are 
vague and enforcement is non-existent. The national level is just as 
bad. For example, law mandates that statewide unions submit an LM-2 
Annual Labor Union Report to the U.S. Department of Labor (DOL) within 
90 days of the close of its fiscal year. The FEA's most recent fiscal 
year ended on August 31, 2002. Its LM-2 Report for that year was due to 
the DOL on or about November 1, 2002. Numerous attempts to obtain a 
copy of the report after the deadline went unfulfilled because the 
report had not yet been filed. The report arrived in late December. To 
our knowledge, no action was taken against FEA for failing to report on 
time. It is our understanding that there are no penalties in the law 
that could be levied.
    In May 2002, a few UTD members attempted to exercise their 
statutory right to financial disclosure and sent a letter to UTD's 
Chief Financial Officer, James Angleton, Jr., requesting an appointment 
to review UTD's financial records at UTD headquarters. Their request 
was cleverly side-stepped. Instead of advising them as to a date and 
time they could review all records, UTD sent ``audited'' financial 
statements. That we know of, no dues paying member of UTD has ever been 
allowed to exert their statutory right and review UTD's financial 
records.
    With this state of affairs in Miami, why didn't anyone intervene on 
behalf of the educators?
    The local State Attorney's office has been hearing the allegations 
of corruption within UTD for years but chose not to investigate.
    Counting on the American Federation of Teachers or AFT to clean-up 
UTD's mess is like sending in Castro to monitor Saddam Hussein on human 
rights issues. AFT and FEA knew or should have known about gross fiscal 
mismanagement as far back as 1999 but did nothing to protect the 
membership. The audited financial records UTD sent to the members, show 
UTD was $1.3 million in arrears in its per capita payments, at least as 
far back as 1999. Furthermore, news stories on the local ABC affiliate, 
exposed questionable practices at UTD as far back as 2001.
    In internal memos exchanged between UTD and FEA during 2003 which 
TRAC has obtained, it is documented that UTD was so far in arrears in 
its per capita payments to both FEA and AFT that it was no longer 
considered a member in good standing. UTD was to be denied a seat at 
AFT's 2002 convention, until FEA intervened and paid UTD's outstanding 
bill. When questioned in a written correspondence by a UTD member, FEA 
misrepresented UTD's status stating UTD was current in its per capita 
payments. For at least 4 years AFT and FEA knew about the problems; 
who's guarding the hen house?
    As AFT ``corrects'' the situation in Miami, AFT's conduct raises 
more questions than it answers: Why was Tornillo allowed to continue to 
draw a salary after the raid? Has he repaid that salary as of this 
date? If, as AFT claims, it cut UTD's staff in half last week, why are 
dues only dropping 10%?
    AFT has said it will give UTD $1.7 million to stop the massive 
defection by UTD members. Have the members of other locals been advised 
and have they consented to their monies being used to bail out a 
corrupt and fiscally irresponsible organization such as UTD? UTD 
Stewards and dues paying members are demanding to see UTD's financial 
records. AFT claims it cannot produce any records because they are in 
FBI custody. Yet according to the FBI, it took records pertaining only 
to Tornillo.
    The spending spree documented by the media only tracks Tornillo's 
expenditures since returning to the local Miami-bade presidency in May 
of 2000. No one has, as of yet, reviewed his financial habits in the 
nearly 30 years in which he was president of FEA. It is doubtful that 
his big-time lavish spending habits began in May of 2000. Union 
staffers knew of Tornillo's indulgences when he was heading the FEA. In 
the mid 1990's Tornillo and Al Shanker, the now-deceased president of 
AFT, took a whirlwind trip to Africa. In the summer of 2001, Tornillo 
and newly-elected president Maureen Dinnen were scheduled to go to Asia 
on another junket. No information has been revealed concerning these 
trips, such as the purpose of the trips, costs and who paid for them. 
This begs the question, ``What do teacher union presidents have to do 
in Africa and Asia that benefits teachers back in Florida? How does a 
trip to Africa and Asia enhance the job of teachers in the inner city 
schools in Miami, Florida or for that matter, a rural school in 
Palatka, Florida?''
    It is of great significance that both Tornillo and the President of 
the D.C. teachers union, Barbara Bullock, were AFT Executive Officers 
during the same period of time they are being investigated for 
embezzling funds from their locals. Who is to say they were not also 
dipping into the national till?
    FEA staff compensation provides another example of information not 
readily available to workers that could affect membership and generate 
an outcry. FEA has approximately 71 staff members. One-forth of them 
were paid in excess of $100,000 in the 2001-2002 school year. More than 
one-third of them were paid in excess of $90,000 and more than half 
were paid in excess of $80,000. Only 6 staff members, or less than 10 
percent of the staff, were paid less than $40,000 a year. Compared to 
the $40,000 average teacher salary in the State of Florida, these 
salaries are scandalous.
    Through conversations with educators, TRAC has learned that most 
UTD members are unaware that a significant portion of their dues leave 
Miami and are sent to the state and national affiliates. The average 
dues for teacher locals in Florida are $450 per year. (UTD dues are 
$843.20). After the national unions (AFT and AFL/CIO) take their per 
capita share of $149.50 and FEA takes its cut of $183.50, only about 
$117 remains at the local level.
    The Florida legislature has proven itself powerless against the 
force of the unions in our state. During the 2002 legislative session, 
Representative Annie Betancourt introduced a bill granting more power 
to the state regulatory body and greater financial disclosure from the 
unions. In the 2003 session, Senator Mike Fasano introduced legislation 
that would have required unions to disclose the application of dues 
monies. In both instances, the unions sent in their lobbyists and the 
bills were defeated.
    Our school district cannot be counted on to protect employees. The 
district and UTD have colluded to violate worker's Constitutional 
rights by including a blanket denial of the right to counsel in their 
contract. UTD, an organization paid handsomely to fight for worker's 
rights, asked to have the right to counsel waived. In addition, UTD has 
the option to refuse representation to any member of the bargaining 
unit, an option it exercises repeatedly. Workers are left with no 
representation and no attorney. This has led to countless abuses in the 
system. Many fine teachers have left the system due to the abuses. 
Former UTD members, who are now TRAC members, have shared their horror 
stories with us. Some have told us, that UTD, during the time they were 
supposed to be defending them, went so far as to say to these educators 
under investigation, ``Just admit you are guilty and let's get it over 
with.''
    The Florida Public Employees Relations Commission or PERC is the 
state organization charged with ensuring union compliance with 
statutory standards and reporting requirements. The form used by PERC 
to collect union financial data is outdated and so vague as to render 
the information worthless. Furthermore, PERC is powerless to 
investigate or impose sanctions. For the reporting year ending 
September 30, 2001, UTD had to file four times to provide PERC with the 
correct information. Many of these refilings can be attributed to my 
persistence of UTD's compliance with statutory requirements. 
Information regarding interest free loans to staff, using dues monies, 
was improperly reported. PERC had not even reviewed the report in 
detail. Why have regulatory bodies whose powers are limited to rubber 
stamping financial forms? Why have reporting at all, when unions can 
file these reports late, as UTD usually does because there are no fines 
imposed for late filing? Why go through the motion of collecting paper 
when PERC does not bother to compare the current year filing to the 
prior year's to make sure that thousands of dollars in interest-free 
loans UTD has made to its staff, haven't mysteriously disappeared off 
of the books?
    A case in point about what happens when the fox is guarding the hen 
house is the story of Judy Herrell, a teacher of 30 years with our 
school district. Ms. Herrell was a LTD steward for over 12 years and 
her school had the highest union penetration of any school in the 
district, with union membership hovering at about 85%. Being a person 
that cares about the people she represents, Ms. Herrell became 
suspicious of the way LTD was handling dues monies. Ms. Herrell tried 
repeatedly to obtain financial information, but her inquiries were met 
with stiff resistance from union executives. After much insistence, Ms. 
Herrell discovered there were two dead people on the payroll at UTD. 
When she questioned Tornillo about those payroll items, she was told to 
mind her own business. The problems continued and Ms. Herrell became 
very outspoken about the mismanagement within UTD including speaking to 
the press. Within a short period of time, Ms. Herrell was put on trial 
by UTD and removed as a steward, though she was allowed the privilege 
of continuing to pay dues with the condition that she never again speak 
to the press. Ms. Herrell quit LTD and became one of TRAC's founding 
members.
    The State of Florida is a Right to Work State. Workers, who see 
value in belonging to a union and wish to belong, should be able to do 
so. However, that does not mean workers should be at the mercy of a 
corrupt union and that union executives should be above the law. Unions 
must be accountable to the people they represent. Unions must provide 
those people with access to all financial data as required by statutes. 
UTD, instead of providing access to financial records, provides audited 
financial reports which we have come to learn omitted much vital 
information. Under penalty of law, unions should be required to file 
annual financial reports that provide complete disclosure of the 
application of dues monies, including all perks and monies going to 
PACs and other political purposes. Members' dues monies should not be 
used to support political agenda not in line with the members' own 
views, without the member's knowledge. State regulatory agencies, such 
as PERC, should be charged with the authority, no the duty, to 
investigate and impose sanctions. The onus should not be on workers to 
have to hire legal counsel and file an unfair labor practice action to 
enforce compliance with state statutes.
    Can teachers in Miami-Dade count on the state attorney, the AFT, 
the FEA, legislature, the school district or PERC to protect them? The 
answer is a resounding NO!
    We need Federal Legislation that will wrest from UTD and similar 
corrupt unions the power they have inappropriately usurped from the 
workers. We need you to come to the aid of workers in this country so 
that workers can reclaim their organizations and return them to their 
lofty goals. Without Federal intervention, corrupt union executives 
will continue to manage dues monies as their personal expense accounts. 
Unions should be by the people and for the people.
    In closing the newest Justice of the Florida Supreme Court, Raoul 
Cantero has been quoted as saying: ``To me, the true measure of a 
person is how he treats those over whom he has power.'' Measured by 
that standard, there are unions that fall criminally short.
       Written Testimony of Roland Ashby-Rier and Alfred Hubbard
    Good Morning to Senator Judd Gregg, Chairman of the Committee on 
Health, Education, Labor, and Pensions, and Ranking member Senator 
Kennedy and other members of the committee. I am Dr. Roland Ashby-Rier, 
a member of the Washington Teachers' Union, along with Mr. Alfred 
Hubbard of W.T.U.
    I am very much aware of the five minutes to present. Dr. Rier and 
Mr. Hubbard will submit a two and an half minutes presentation(s). The 
two presentations will be the following:

  Why the American Federation of Teachers Must Have a Secret Ballot--
                           Roland Ashby-Rier

    As of July 2002, the American Federation of Teachers' didn't have a 
Secret Ballot--at its most recent convention in Las Vegas, Nevada. The 
following procedure(s) are used to vote at the American Federation of 
Teachers' Convention:
    1. Your ballot is given to you by the president of your local, or 
the ranking delegate.
    2. You mark your ballot and return the ballot to the president or 
the ranking delegate. (A secret ballot box is not used in this 
procedure)
    Without a secret ballot, the AFT is able to control the elections 
of the officers, and the Executive Board. It is my opinion; this 
election should be held like any public election. If AFT had a secret 
ballot the following would be possible:
    The leadership would change
    A new leadership would challenge and change the methods and 
procedures used by AFT
    Members would not be influenced on how to vote
    The voting power would be with the membership, and not with the 
leadership of the union.
    The Washington Teachers' Union and the Miami-bade union in Florida 
would not have been allowed to rake off funds from union members.
    In conclusion, when I and others vote at the AFT Convention, it 
would be better if the union would have a secret ballot . . . In 
addition, severe penalties should be used to enforce a secret ballot 
for all unions.

           Changes to the Landrum-Griffin Act--Alfred Hubbard

    Thank you Senator Gregg, Ranking member Senator Kennedy and other 
members of this committee. I appreciate the opportunity to offer this 
statement on a matter of paramount importance to me personally. It is 
also a matter that has great impact upon me and my fellow professionals 
in the teaching profession.
    As a Social Science teacher in the Nation's Capitol, I have long 
been a forceful advocate for organized labor and the founding 
principals upon which union organizations have coalesced. Recently 
however, events within our labor union, The Washington Teachers' Union, 
local #6 of the American Federation of Teachers, has left many of us 
fraught with disillusionment and disappointment.
    I will not rehash the history of events that has cast aspersions 
upon our local and stained this most notable occupation with disrepute. 
I will, in my oral testimony, offer more specific characterizations of 
what I believe transpired--if that be the desire of your committee. For 
now I will simply assert that certain sections of Title 29 need to be 
revised and strengthened if we are to move forward in a fashion that 
has the capacity to restore membership trust and support in our labor 
union.

    [Whereupon, at 12:17 p.m., the committee was adjourned.]

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