Corrupt AFL-CIO Labor Unions Illegally Meddle In Politics & Get Slapped Back

Unions pressure financial firms not to back Bush on Social Security

By BOB DART
Cox News Service
Friday, April 01, 2005

WASHINGTON — "I don't know but I've been told — Wall Street wants the workers' gold," union members chanted in the financial district of the nation's capital on Thursday as organized labor rallied against President Bush's push for private Social Security accounts.

Along with their shouts, protesters delivered letters urging the financial firms of Charles Schwab and Wachovia Corporation to "withdraw all support for privatizing Social Security."

With $400 billion in pension funds, unions can exert considerable pressure on the investment community. The A.F.L.-C.I.O. has already convinced the brokerage firms of Edward Jones and Waddell & Reed to pull out of Compass, a business coalition supporting the Bush plan.

"This will be the biggest mobilization in the history of the labor movement," A.F.L.-C.I.O. President John Sweeney promised the protesters. Organizers said the unions staged similar rallies in 75 cities around the country on Thursday.

If the Bush plan is enacted, "politicians will be about to hand-pick which Wall Street firms make billions of dollars in inflated fees managing private accounts," he charged. "We're not going to let them line their pockets by cutting Social Security for everyone else."

But Republican Reps. John Boehner of Ohio and Sam Johnson of Texas have asked the Labor Department to investigate whether the unions are waging an illegal campaign.

In a letter to Labor Secretary Elaine L. Chao, the congressmen said they are concerned organized labor's pressure tactics on the financial firms and brokerage houses "raise serious legal questions involving federal labor and pension law."

Boehner is chairman of the House Committee on Education and the Workforce and Johnson is chairman of the committee's Subcommittee on Employer-Employee Relations.

The March 18 letter said the union tactics include "tacit and/or explicit notice to these firms that if they support the president's proposal, the union will withdraw its assets and invest through brokerages they find more politically palatable."

Such activities could violate the National Labor Relations Act and the fiduciary responsibilities owed to union members by their leadership under the Labor-Management Reporting and Disclosure Act of 1959 and the Employee Retirement Income Security Act of 1974, the congressmen wrote.

The unions counter that its members are only exercising their First Amendment rights to free speech.

"They say privatize. We say organize," the group of about 200 protesters chanted on the sidewalk outside of Schwab's Washington office. The workers' wardrobes showed a rainbow of loyalties: Blue T-shirts for the American Federation of Teachers. Florescent yellow T-shirts for the International Brotherhood of Electrical Workers. Steelworkers in black jackets with leather sleeves. Communication Workers of America in red sweatshirts.

"Charles Schwab, rich and rude. We don't like your attitude," they yelled.

"We already have corruption and greed on Wall Street," said Jim Bowles, 70, a retired meat cutter and Teamster. "Now they want to take our hard-earned money and give it to the fat cats."

Sweeney charged that financial companies have a conflict of interest in supporting personal accounts since they stand to profit if Social Security funds are invested in the stock market.

"Privatizing Social Security may be good business for Charles Schwab and Wachovia, but its a bad deal for working Americans," he said.

The firms themselves denied even taking sides in the Social Security debate.

"We feel these protests are misdirected and misguided," said Alison Wertheim, Schwab's vice president for corporate public relations. "We are not a proponent of privatization. We are not an advocate of any specific approach related to Social Security reform."

"Wachovia does not have a position on private accounts," said David Oliver, a spokesman for the company. The financial firm "believes in the fundamental importance of Social Security, and we think action to strengthen the system is absolutely necessary."

Sweeney said the firms were targeted because of their backing for the Alliance for Worker Retirement Security, an association of businesses supporting the Bush plan. In his letter, he demanded that the firms "cease all support" for such groups.

Supporters of the Bush plan said such warnings are inappropriate.

"Today's theatrics once again reveal that many labor unions are more concerned with partisan politics than the interests of their own members," said Tracey Schmitt, press secretary of the Republican National Committee. "Recent activities to intimidate organizations that support the president's Social Security efforts amount to thuggery and do nothing to encourage public discourse."

A national survey of union members showed that 60 percent would be interested in creating a personal retirement account if offered the option, according to backers of Bush's plan.

"We meet rank-and-file union members every day who are outraged that their union is obstructing reform," said Derrick Max, executive director of Compass or the Coalition for the Modernization and Protection of America's Social Security, which commissioned the poll.


Bob Dart's e-mail address is bobdart(at)coxnews.com


News from the
Committee on Education and the Workforce
John Boehner, Chairman

FOR IMMEDIATE RELEASE
March 18, 2005
CONTACTS: Kevin Smith or
Dave Schnittger
Telephone: (202) 225-4527

Boehner, Johnson Call on Labor Department to Investigate Whether Union Leader Tactics to Influence Social Security Debate Violate Federal Law


WASHINGTON, D.C. – House Education & the Workforce Committee Chairman John Boehner (R-OH) and Employer-Employee Relations Subcommittee Chairman Sam Johnson (R-TX) today sent a letter to U.S. Secretary of Labor Elaine Chao, calling on the Labor Department to investigate whether the concerted efforts of organized labor to pressure financial firms and brokerage institutions to withdraw their support of the President’s proposal to reform Social Security have in fact violated federal labor and pension law.


“Recent media reports have raised serious legal questions about whether union leaders are in fact violating federal labor and pension laws by pressuring employers to withdraw their support for President Bush’s Social Security reform plan,” said Boehner. “The debate over how to ensure the solvency of Social Security for future generations should be open and honest, but it shouldn’t be influenced by special interests who may be breaking federal law.”


“If labor bosses are violating federal labor and pension laws by pressuring employers into opposing Social Security reform legislation they know would benefit their workers, we believe it should be investigated by the proper authorities,” added Johnson. “It is shameful – and may well violate the law – if union leaders are jeopardizing their members’ pensions for purely political reasons.”


The letter raises serious concerns about specific legal questions, as excerpts indicate below:


“The activities recounted in these reports raise serious questions as to their legality under a variety of federal laws, including the National Labor Relations Act (NLRA), which governs the permissible use by labor organizations of their members’ dues, and restricts the ability of labor organizations to engage in secondary activity (such as picketing or protesting). Perhaps more troubling are the questions these activities raise with respect to the fiduciary duties owed to union members by their leadership, and to union pension plan participants by their plans’ trustees, under the Labor-Management Reporting and Disclosure Act of 1959 (LMRDA) and the Employee Retirement Income Security Act of 1974 (ERISA).


“As you well know, under LMRDA and ERISA, union leaders and union pension plan trustees owe fiduciary duties to their constituencies (be they members or participants) to hold, manage, and invest their assets solely in the best pecuniary interests of these beneficiaries. The threat – whether explicit or tacit – that any labor organization will reassess its investment decisions (which, presumably have been and legally must be calculated to maximize the financial return for participants) for political considerations on its face raises the question of whether fiduciary duties are being breached. Put more simply, when union leaders and pension plan trustees base investment decisions on politics, we question how they can do so lawfully in the face of statutory requirements that such decisions be based on the economic and fiduciary best interests of beneficiaries and participants.”


# # # # #


(Full letter attached below)

COMMITTEE ON EDUCATION
AND THE WORKFORCE
U.S. HOUSE OF REPRESENTATIVES
2181 RAYBURN HOUSE OFFICE BUILDING
WASHINGTON, DC 20515-6100




March 18, 2005


The Honorable Elaine L. Chao
Secretary
U.S. Department of Labor
200 Constitution Avenue, N.W.
Washington, DC 20210


Dear Secretary Chao:


We write in our respective capacities as Chairman of the U.S. House Committee on Education and the Workforce and Chairman of the Committee’s Subcommittee on Employer-Employee Relations to express our deep concern about recent media reports concerning the President’s proposal to reform Social Security and the tactics of union leaders in response to that proposal, and to request that the Department of Labor immediately begin an investigation of this matter.


Specifically, we are gravely concerned with recent media reports indicating that organized labor has engaged in concerted activity to pressure financial firms and brokerage interests to withdraw their support of the President’s proposal to reform Social Security through tactics that raise serious legal questions involving federal labor and pension law. These reports indicate that in recent weeks, both Waddell & Reed Financial Inc. and Edward D. Jones & Co. have withdrawn their support for reform in the face of concerted union pressure tactics. These tactics have included public protest and picketing of the target firms, as well as tacit and/or explicit notice to these firms that if they support the President’s proposal, the union will withdraw its assets and invest through brokerages they find more politically palatable.


AFL-CIO indicates that it has similarly targeted a number of others among the nation’s largest brokerages, including J.P. Morgan Chase & Co., Morgan Stanley, Merrill Lynch & Co., Barclay Global Investors N.A., T. Rowe Price Group Inc., State Street Corp., Wachovia, and Charles Schwab. Indeed, AFL-CIO lobbyists have indicated publicly that the AFL-CIO has “no intention of letting any of these companies get away with this [supporting the President’s proposal] while they manage our workers funds.”* As you may recall, in 2001 and 2002, similar pressure was brought to bear on financial interests, including in particular State Street Corp., which appeared to reverse its longstanding support for reform in the face of union pressure.


The activities recounted in these reports raise serious questions as to their legality under a variety of federal laws, including the National Labor Relations Act (NLRA), which governs the permissible use by labor organizations of their members’ dues, and restricts the ability of labor organizations to engage in secondary activity (such as picketing or protesting). Perhaps more troubling are the questions these activities raise with respect to the fiduciary duties owed to union members by their leadership, and to union pension plan participants by their plans’ trustees, under the Labor-Management Reporting and Disclosure Act of 1959 (LMRDA) and the Employee Retirement Income Security Act of 1974 (ERISA).


As you well know, under LMRDA and ERISA, union leaders and union pension plan trustees owe fiduciary duties to their constituencies (be they members or participants) to hold, manage, and invest their assets solely in the best pecuniary interests of these beneficiaries. The threat – whether explicit or tacit – that any labor organization will reassess its investment decisions (which, presumably have been and legally must be calculated to maximize the financial return for participants) for political considerations on its face raises the question of whether fiduciary duties are being breached. Put more simply, when union leaders and pension plan trustees base investment decisions on politics, we question how they can do so lawfully in the face of statutory requirements that such decisions be based on the economic and fiduciary best interests of beneficiaries and participants.*


In light of the above, we would request that the Department begin a formal investigation of this matter and respond to the concerns we have outlined above. We would appreciate the Department’s immediate attention to this matter, and in light of the Committee and Subcommittee’s oversight responsibilities, hope and trust that the Department will keep us informed of its efforts in this matter on an ongoing and timely basis.


We thank you for your time and attention to this matter.


Sincerely yours,

/s/

JOHN A. BOEHNER

Chairman




/s/

SAM JOHNSON

Chairman, Subcommittee on
Employer-Employee Relations



--------------------------------------------------------------------------------

* Gerald Shea of AFL-CIO, quoted in Roll Call (Tory Newmyer, “Social Security Critics Slow to Coalesce,” January 31, 2005).

* Indeed, irrespective of its legality under federal labor and pension law, the specter of investment decisions being made by political operatives raises the ancillary question of whether these individuals are qualified to make such decisions in the first instance. As the recent ULLICO scandal graphically demonstrated, no union member is well served when financial decisions relating to the management of billions of dollars of assets are made by non-experts or for political considerations.


Labor Dept. Warns Unions On Soc. Sec. Lobbying Funds

Wednesday, May 04, 2005


WASHINGTON — The Labor Department cautioned organized labor in a letter made public Wednesday not to use money from pension funds to lobby against President Bush's proposal to overhaul Social Security.

"The department is very concerned about the potential use of plan assets to promote particular policy positions," Alan D. Lebowitz, a department official, wrote AFL-CIO's top lawyer.

In the letter to Jonathan P. Hiatt, AFL-CIO's general counsel, Lebowitz also wrote that officials charged with administering multistate pension funds must not hire or fire service providers primarily on the basis of their positions on Social Security legislation.

Damon Silvers, an AFL-CIO lawyer, said, "We don't disagree with the Department of Labor that plans should not be lobbying on Social Security. However, we believe, and we believe the department agrees, that the plans ought to be able to educate their participants on matters directly related to their retirement security."

As for hiring decisions about investment companies, Silvers said, "we have no problem" with the letter. He said the AFL-CIO has considered a company's position on Social Security as a "collateral issue," and not as the sole or primary basis for a decision.

Lebowitz sent the letter after GOP Reps. John Boehner of Ohio and Sam Johnson of Texas requested an investigation.

The Labor Department letter to the AFL-CIO marked a political turnabout of sorts. Democrats have complained for months that the White House has improperly used the Social Security Administration itself to lobby on behalf of Bush's proposals.

Rep. Henry Waxman, D-Calif., has asked the Government Accountability Office, the investigative arm of Congress, to determine how much the administration's effort is costing. "Using taxpayer resources to mount a sophisticated propaganda and lobbying campaign is an abuse of the president's high office," he said earlier this year.

Last month, the AFL-CIO trumpeted success in persuading one financial services company, Waddell & Reed, to drop its membership in the Alliance for Worker Retirement Security, a group lobbying for personal accounts. The announcement came a day before the labor federation planned a demonstration at the firm's headquarters outside Kansas City, Mo.

Organized labor opposes Bush's call for Social Security solvency legislation that would also allow younger workers to divert a portion of their payroll taxes into personal accounts.

Democrats also are strongly opposed, and congressional Republicans are moving slowly, fearful of potential political repercussions.

Rep. Bill Thomas, R-Calif., chairman of the House Ways and Means Committee, has announced plans for weekly hearings beginning this month on retirement issues, including Social Security. Among the witnesses scheduled to testify is Robert C. Pozen, an investment company executive and architect of a plan to help restore solvency to Social Security.

Bush spoke favorably last week of Pozen's approach, which would reduce benefits promised to future middle and upper income retirees.

Thomas said last week he hopes to present legislation to the committee in June. Speaker Dennis Hastert, R-Ill., said during the day he wasn't going to be "nailed down to one specific timetable" for a vote by the full House.