From: Michael Bologna, BNA-Chicago

CHICAGO -- Two lawsuits alleging racketeering, fraud and legal malpractice against former officers of International Brotherhood of Teamsters Local 705 and trustees of its pension and health funds have been settled, with the huge Chicago local collecting S13.5 million, the union announced March 12 (Cook v. McCarron DC NIL 92 C 7042. 2/2796 and Local 705 v. Ligurotis DC NIL 95 C 0828, 2/27/96).

Teamsters General President Ron Carey said the union reached a settlement which slams the door on Local 705's legacy of fraudulent practices and reimburses the local's health and welfare, and pension funds for losses incurred during the late 1980s and early 1990s when corrupt officers, trustees, lawyers and doctors ran the organizations. Carey said the settlement represents one of the first times a union has successfully used the federal Racketeer Influence and Corrupt Organization Act (RICO) to recover funds defrauded from its membership. He said the agreement should send a signal that the International union will not tolerate corrupt practices.

"Local 705 and its health and pension funds used to be a cookie jar of perks and privileges for corrupt officers and their cronies," Carey said during a briefing at Local 705 headquarters, "But no more. Today's Local 705 has one purpose only -- to serve the members. We will continue to push forward and to root out wrongdoing wherever it may appear. Corruption has no place in today' s Teamsters union . "

Jeffrey Gilbert, who represented Local 705 as a plaintiff in one of the cases, said the settlement ends class action litigation filed on Feb. 9, 1995 on behalf of Local 70S's 15,000 members and thousands of retirees and family members covered by the union's two funds. That suit contained four causes of action under RICO, seven claims of breach of fiduciary duty under the Employee Retirement Income Security Act (ERISA), two claims of common law fraud and one claim of legal malpractice.

Gilbert, a partner with the Chicago firm of Johnson, Jones, Snelling & Gilbert, said the prime target of the suit was Daniel "Danny" Ligurotis, who was secretary-treasurer of LOCAL 705 between 1986 and March of 1993 and was eventually banned from Teamster membership for corrupt practices. The suit alleges that Ligurotis was at the heart of four schemes aimed at bilking the pension and health funds.

Among other things, the suit alleged Ligurotis helped a convicted felon and organized crime figure access $2 million from the two union funds to open a lavish restaurant at Local 705's "Teamster City" headquarters. The restaurant later closed and failed to make any money for the local. In addition, the suit claimed Ligurotis conspired with members of the Luchese organized crime family in an extortion scheme.

The suit also alleged that the local's health and welfare fund was compromised by Ligurotis and Dr. William Dalessandro, who was the medical director of the Local 705 medical clinic. Dalessendro was allegedly paid a huge salary for very little work and then steered Local 705 fund beneficiaries to health care providers in which he had a substantial proprietary interest.

Finally, the suit pointed to a conflict of interest scheme involving Ligurotls and Sherman Carmell, the general counsel of the pension and health funds. Carmell, "actually facilitated and implemented Ligurotis' looting schemes to the detriment of the funds," the suit stated.

The settlement also puts an end to litigation filed four years ago by Local 705 member Archie Cook. That suit, filed against the local on behalf of the union' s membership, alleged breaches of fiduciary duty under ERISA and sought repayment of funds lost from the health and welfare fund only. The two cases were consolidated for settlement purposes.

Gilbert said the settlement was preliminarily approved by U,S. District Court Judge Blanche Manning on Feb. 27. Final approval of the settlement is dependent on a fairness hearing scheduled for June 3. Under the settlement, $13.1 million is being held in escrow in the name of the health and welfare fund and S387,000 is being held in escrow on behalf of the pension fund until the settlement receives final approval.

Gilbert noted that under the settlement, the defendants admit no wrong doing. Gilbert and Carey would not disclose how much of the final total would be paid by individual defendants and their respective insurers.

Joel Hellman, who represented Cook in the litigation, said his client is pleased with the dollar amount of the settlement. But Hellman said he was particularly pleased with certain reforms to the health and welfare fund under the agreement. Among other things, the settlement requires that the fund's accounting procedures be automated, so Local 70S's membership can more easily conduct audits. Specific fund reserve requirements were established and rules relating to administrative costs were also established to remove the possibility or payroll padding.

Hellman noted that specific requirements were also added which guarantee that beneficiaries are compensated in line with their employers' contribution. In the past, Hellman said, dozens of different rates were charged to employers while employees were receiving roughly equal coverage. Such management inequities were a major factor leading to losses to the fund.

While the situation is finally being settled, some important disputes between the two winning parties still remain. Hellman said Carey and the reform group brought in to manage the local as temporary trustees in 1993 and later as elected officials actually obstructed settlement of the suit. He noted that he was in negotiations to settle the matter before Local 705's suit was filed, In addition, he said the new leaders of the local, who were later added as defendants to Cook's suit, fought against reforms to the health and welfare fund.

Responding to the suggestion that Local 705 actually obstructed settlement of the matter, Carey responded, "his (Cook's) suit went absolutely nowhere until we got involved."

Local 705 and attorneys for the fund' are also objecting to weighty attorney fees being requested by Hellman and several other plaintiff attorneys.

Barbara Lillian, co-counsel for the health and welfare fond, said Cook's attorneys are requesting $4.9 million in fees and Cook seeks an award of $25,000. She said the fund will object to the fees before Judge Mannlng.

Hellman said his team took the case on a contingency basis and is entitled to fair reimbursement. He said he looks forward to a fair hearing on the question before Judge Manning.

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Union Members by Jim McGough
Laborers for Justice & Democracy