By GLENN BURKINS and GLENN R. SIMPSON
Staff Reporters of THE WALL STREET JOURNAL

WASHINGTON-- International Brotherhood of Teamsters President Ron Carey, who took office six years ago vowing to rid the union of systemic corruption, has been disqualified from next year's rerun election against James P. Hoffa, son of legendary Teamsters President Jimmy Hoffa.

Mr. Carey, seeking to secure a second five-year term as head of the nation's largest private-sector union, was ruled unfit to run Monday by former federal Judge Kenneth Conboy, a special adjudicator in the federal cleanup of the union. He found that Mr. Carey "tolerated and engaged" in an illegal fund-raising scheme to divert $735,000 in Teamsters money into his own cash-strapped campaign. Mr. Carey has repeatedly denied wrongdoing.

The decision also found that three other prominent labor leaders were involved in alleged fund-raising improprieties and named a fund-raiser for President Clinton as well.

Since last spring, federal Teamsters monitors and federal prosecutors in New York have probed allegations of fund-raising violations by Mr. Carey's campaign in the 1996 Teamsters presidential election, which Mr. Carey won narrowly. In August, his win was thrown out by former election officer Barbara Zack Quindel, who cited the fund-raising improprieties and called the rerun election.

Three people involved with Mr. Carey's campaign have admitted to criminal fraud charges related to fund-raising and are awaiting sentencing. The alleged schemes include complex contribution swaps between the Teamsters and the Democratic Party, other unions and liberal groups such as Citizen Action.

Federal prosecutors in New York allege the schemes aimed to raise improper outside contributions for Mr. Carey and hide them from federal Teamsters election monitors. Federal rules prohibit most outside groups and individuals from contributing to Teamsters elections.

In a separate ruling, Mr. Conboy ordered interim election officer Benetta Mansfield to reopen an investigation into alleged fund-raising abuses by the Hoffa campaign. Ms. Quindel, who recently recused herself, had looked into those allegations. But because Mr. Hoffa lost the first election, Ms. Quindel ruled that any wrongdoing by his side didn't materially affect the outcome. It was unclear if this investigation would further delay the Teamsters vote.

The ruling makes Mr. Hoffa, a Detroit labor lawyer, the perceived front-runner when the union's 1.4 million members begin mailing in their ballots in mid-February.

It also raises the specter that Mr. Carey, 61 years old, may face criminal charges of alleged fund-raising fraud in the grand jury probe under way in New York.

At a news conference Monday, Mr. Carey again denied involvement in the scheme and blamed campaign aides. "I've done nothing wrong," Mr. Carey insisted. "I've never been involved in anything wrong... . And if anything wrong were going on I would have stopped it dead in its tracks."

Mr. Hoffa, meanwhile, called on Mr. Carey to step down as union president immediately, saying he has "no legitimacy whatsoever." Although Mr. Carey said he would fight to clear his name, his status most likely would be decided by the Independent Review Board. The federal oversight body would decide when Mr. Carey would resign his office.

Meanwhile, officials inside the Teamsters and the Carey campaign were quietly speculating on who might step forward to challenge Mr. Hoffa.

Under rules governing Teamsters elections, candidates may be nominated through Dec. 19. Some of the names being bandied about include Thomas Leedham, a Teamsters vice president from Portland, Ore., who represents the union's Western region; Diana Kilmury, an at-large vice president; Tom Gilmartin Jr. of Connecticut, who represents the Eastern region; and Ken Hall, who heads the union's parcel and small-package division. Mr. Hall was one of the chief negotiators in the Teamsters' 15-day strike against United Parcel Service of America Inc.

In determining that Mr. Carey was involved in the fund-raising schemes, Mr. Conboy cited documents and the testimony of three witnesses, including Mr. Carey's secretary and his former campaign manager. While Mr. Carey denied knowing of the schemes, Mr. Conboy said, "I find Mr. Carey's testimony not credible" in light of contradictory evidence.

The report also cites evidence indicating that labor leaders Richard Trumka, Andrew Stern and Gerald McEntee were involved in improper fund-raising for Mr. Carey. Mr. Trumka is the secretary-treasurer of the AFL-CIO; Mr. Stern is president of the Services Employees International Union; and Mr. McEntee is president of the American Federation of State, County and Municipal Employees. All three officials have denied wrongdoing in public statements.

Mr. Trumka allegedly raised $50,000 for Mr. Carey. In response to a subpoena from Mr. Conboy, Mr. Trumka asserted his constitutional right not to testify.

Mr. McEntee told Mr. Conboy he solicited $20,000 in cash from the owners of a printing company that does work for AFSCME.

The report says Mr. Stern agreed to raise $50,000 for Mr. Carey but never did. However, a lawyer for SEIU allegedly raised $16,000 in connection with that commitment.

Jean Nolan, a spokeswoman for AFSCME, said officials there are cooperating in the federal inquiries but declined to comment further. Nicole Seligman, a lawyer for Mr. Trumka, said she is "confident the facts will show that Rich Trumka has acted properly and lawfully." But because of the criminal probe, Mr. Trumka hasn't been able to talk about his role.

Mr. Stern wasn't immediately available for comment.

Meanwhile, there have been few indications about the pace of a criminal inquiry into the fund-raising allegations under way in New York. While Mr. Carey has testified in that probe, the focus has been on former Teamsters political director William Hamilton, who was named as a key figure in the schemes by both Ms. Quindel and Mr. Conboy.

According to several people familiar with the matter, a grand jury has been focusing on testimony about Mr. Hamilton's role. Mr. Hamilton's lawyer didn't immediately return telephone calls.

Mr. Conboy's report also described the role that Terence McAuliffe, President Clinton's chief fund-raiser in the 1996 presidential election, had in the union schemes. Last fall, Mr. Carey allegedly called Mr. McAuliffe to thank him for his fund-raising help, according to the report, and left a message.

Richard Ben Veniste, Mr. McAuliffe's attorney, said Mr. McAuliffe never spoke to Mr. Carey and never received a message from him.

Copyright 1997 Dow Jones & Company, Inc.

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