By Frank Swoboda and Sharon Walsh

Washington Post Staff Writers

Tuesday, January 20, 1998

As chairman of the House subcommittee investigating last year's Teamsters election, Rep. Peter Hoekstra (R-Mich.) wants to know how the federal government could spend nearly $20 million to supervise such a mess.

One year after Teamsters President Ron Carey was declared the winner in a narrow reelection victory over James P. Hoffa, the federal government appears headed back to square one in the biggest cleanup effort in U.S. trade union history, raising the question for Hoekstra and other congressional critics: Just what were the federal watchdogs watching?

The government has been forced to order a new election, Carey has been disqualified from running and faces expulsion from the union, three of his top campaign operatives have pleaded guilty to criminal fraud charges and a federal grand jury in New York is pressing its investigation of the election campaign.

Over the last four years, the federal government has spent nearly $20 million to supervise the union elections, sending teams of monitors to every local union hall across the nation where there was a contested election to assure that none of the Teamsters' 1.4 million members was cheated out of a vote.

The government's main charter was to keep its eye on the balloting every step of the way, from the selection of delegates to the union's nominating convention, to the actual counting of the ballots. In between, it adjudicated more than 1,500 election protests from the various candidates, an expensive and time-consuming legalistic process.

But in the end, some federal officials suggest, the election office was so busy focusing its efforts on preventing voter fraud that it failed to pay enough attention to how the election campaigns were being financed by the candidates. Charges about campaign financing abuses were what brought down Carey.

"The more you look at it, the more disappointing the federal oversight really is," Hoekstra said.

But Mary Jo White, the U.S. attorney who is leading a criminal investigation of the Teamsters elections, says the fault does not lie with the government officials overseeing the election.

"It's the fault of those who broke the law," said White, of the Southern District of New York. "No mechanism can prevent every violation and stop every intentional violator. By virtue of this process [federal oversight], this wrongdoing was found. It has worked."

The current government effort to clean up the Teamsters began in the spring of 1988 when the Justice Department filed a civil racketeering suit against the union in New York, charging that the Teamsters leadership had made a "devil's pact" with organized crime. The lawsuit was part of a 40-year government campaign to clean up a union in which three of the last seven presidents have been imprisoned on a variety of charges, ranging from racketeering to tax evasion (a fourth died in office while under indictment).

After months of negotiations with the Justice Department, the Teamsters leadership settled the racketeering suit in the fall of 1989 by agreeing to hold the first direct elections of national union officers under strict government supervision. As part of the consent decree, the union was placed under what amounted to indefinite federal court control while government-appointed officers investigated corruption and monitored the internal affairs of the union.

Under the consent decree, federal oversight comes under the U.S. District Court in New York and is generally handled by the U.S. Attorney's Office in New York. Several assistant U.S. attorneys are responsible for monitoring union activities. The Office of the Elections Officer in the Justice Department oversees the elections. It has been the elections office, however, that has received criticism from Hoekstra, who gives good marks to White.

In December 1991, Carey, along with his entire slate of reform candidates, was voted into office in an election the Justice Department hailed as a major victory for union reform. With the government's help, Carey began to sweep out corrupt union officials, placing more than 70 local unions under trusteeship. The new regime sold off the union jets and limousines, and eliminated multiple salaries for many of the union's top officers.

Ironically, the current scandal involves Carey, the union reformer on whom the Justice Department had pinned its hopes to help clean up the Teamsters.

Federal investigators trace the scandal to the polls by the Carey campaign in the fall of 1996, showing Hoffa running neck and neck with Carey for the Teamsters presidency. The polls triggered what federal investigators call a "network of financial schemes" to illegally pump money into the Carey campaign, schemes that would lead to the embezzlement of nearly $1 million from the union's general treasury by the Carey campaign.

Federal prosecutors and other government investigators have outlined a series of transactions in which the union money was donated to various political groups for use in the 1996 federal election with the understanding that those groups then would arrange for donations to the Carey campaign. In other cases, prosecutors said the union would contract with vendors to have work performed and then would overpay the vendor with the understanding that the excess money would go to the Carey campaign.

It was such a vending arrangement that appears to have triggered the government's initial investigation into the financing of Carey's campaign.

Both the government and the Hoffa campaign claim to have discovered the financial schemes. But both sides agree that the first real clue that something might be wrong with Carey's campaign finances was a campaign expense report, filed shortly after the election, which showed that Barbara Arnold, who listed her occupation as "student," had made two large contributions to a committee supporting Carey in the waning days of the election.

The expense report from the Carey campaign was filed with federal officials overseeing the elections on Jan. 2, 1997, nearly three weeks after the vote counting was completed for the Carey-Hoffa race. The report covered the period from Nov. 21 through Dec. 20, 1996, and federal officials claim the scheme would have been caught before the election if it had shown up on earlier campaign expense reports.

According to the report, a committee called the Teamsters for a Corruption Free Union received two checks totaling $95,000 from Arnold. Arnold, it turns out, is the wife of Michael Ansara, the founder and chairman of the Share Group, a Boston telemarketing firm that did business with the Teamsters. Not long after Arnold made her contribution to the TCFU, the union sent a check for $97,000 to a business called Share Consulting, which Ansara also owned. Soon after, according to court documents, Arnold got her money back.

Hoekstra's committee wants to take a look at all of the financial transactions involved in the Carey campaign, including contributions to various groups in last year's federal elections that might have been involved in contribution swap schemes with the Teamsters. Hoekstra originally had hoped to hold hearings this month, but they have been put off until at least February and no new date has been set.

Hoekstra, who has hired former U.S. attorney Joseph E. diGenova to help his committee investigate the Teamsters election, said he doesn't buy the notion that a few people panicked in the waning days of the Carey campaign and suddenly cooked up the illegal financing schemes.

"You don't build that kind of strategy in 48 hours. I tend to be suspicious that this was going on for a longer period of time," Hoekstra said. "It causes us to really reassess the effectiveness of the whole [oversight] process. To me it doesn't appear that this was a last two week election push. The problems may have been deeper, and if they were deeper and systematic, why didn't they catch this earlier?"

Justice Department officials, however, say the government oversight has made a substantial difference in the union. And White calls the government cleanup effort a success.

"The real challenge now is to continue an extraordinarily successful [cleanup] effort and not let the current problems derail the forward progress made under the consent decree," White said.

"Although very serious, these are not the crimes of the past," White said. "I think there's been a positive sea change [in the union]. But the process of reform must continue. I would be naive to think that all of the union's problems have been completely eradicated."

A Justice Department official assessing the impact of the government's involvement said that even with the current scandal, "compare this election to where the Teamsters were 10 years ago."

As a result of the financing scandals, Congress has voted for a ban on government spending for future Teamsters elections and the courts have ordered the union to pay the estimated $7.4 million cost of the re-run election. In explaining his decision to force the union to pay, U.S. District Judge David Edelstein said, "They made the mess. It is their job to clean it up at any price."

In the meantime, the federal elections officer appointed by the courts to oversee the new balloting is taking a long, hard look at Hoffa's campaign finances. Michael Cherkasky, a former mob-busting prosecutor from New York City, has been appointed to conduct the Hoffa investigation and supervise the re-run election, which probably will not be completed until late this year.

Carey and his former chief of government affairs, William W. Hamilton Jr., appear today before the Independent Review Board in U.S. District Court here to appeal board charges that could bar them from the union. The government-appointed board was set up to consider violations of the consent decree by union members.

And for her part, White said the government will continue its criminal investigation of the Teamsters. "There's a lot of work to do and you see us doing it," she said.

© Copyright 1998 The Washington Post Company