Contrary to campaign promises to increase transparency and
accountability, the Obama Administration has announced plans to
rescind union accountability and financial transparency regulations
implemented by the Department of Labor (DOL) during the
Administration of George W. Bush.
These regulations make union officials more accountable to union
members and deter fraud and embezzlement. The DOL has convicted
hundreds of union officials over the past eight years. Rescinding
these forms will facilitate fraud and harm union members.
Union Financial Transparency
On January 21, the DOL published regulations updating the Form
LM-2, the annual financial disclosure report unions file with the
DOL. Unions collect between 1 and 2 percent of their members'
earnings as dues, and union officers are required to spend that
money on the workers' behalf--they may not use union funds for
their personal interest. The LM-2 revisions required unions to:
- Disclose the total value of all benefits received by union
officers and employees;
- Disclose the names of parties buying and selling union assets;
- Itemize union receipts (currently unions must itemize only
The DOL also updated the LM-30 conflict of interest reporting
form that union officers and employees must file. These forms bring
to light situations where union officers receive gifts or otherwise
benefit from companies that their union does business with. They
deter sweetheart deals where companies that give "gifts" to union
officers get union business on favorable terms. The revisions
required more union officials (such as shop stewards) to report
potential conflicts of interest.
These regulations allow members to hold their unions accountable
for how their dues are spent. Many union officials resent financial
transparency regulations, but union members should know how much
their officers pay themselves out of dues. To safeguard against
sweetheart deals, union members should also have the ability to see
who buys and sells union assets. Union members deserve to know how
their unions are run.
Reducing Union Transparency
President Obama campaigned on bringing transparency and
accountability to government. However, the DOL recently announced
plans first to delay the implementation of updated LM-2 and then to
eliminate it entirely. The DOL has also announced that it will not
enforce the new LM-30 conflict of interest forms and that unions
may continue to file with the old forms.
These actions violate the President's campaign promise to
increase transparency and accountability. Union members will now
have less information about how their officers spend their money.
The Administration has no compelling public policy reason for
keeping workers in the dark about union finances.
Union Corruption Still a Problem
Workers need information to hold their unions accountable,
because union corruption remains a serious problem. The vast
majority of union officers obey the law. However, a minority of
union officers do misuse their position for personal gain. Since
2001, the Office of Labor Management Standards has indicted 1,004
union officials for crimes such as fraud and embezzlement of
members' dues. It has won 929 convictions and $93 million in
court-ordered restitution to union members.
Increasing financial disclosure has helped bring this fraud to
light. Reporters investigating LM-2 filings found serious
corruption that led to the resignation of several top officials
within the Service Employees International Union (SEIU):
- Tyrone Freeman, president of the 160,000-member SEIU Los
Angeles local, resigned after LM-2 filings showed that his union
spent hundreds of thousands of dollars at companies owned by his
family members for little apparent benefit and that he billed the
union $8,100 for costs surrounding his wedding in Hawaii.
- Annelle Grajeda, executive vice president of the national SEIU,
stepped down after investigations revealed that the union paid her
boyfriend tens of thousands of dollars.
- Rickman Jackson, president of the largest SEIU local in
Michigan, stepped down after investigations revealed that he rented
his home to a union-sponsored housing nonprofit and that he
received $196,000 in compensation from a California local and the
SEIU national office while working for the Michigan local.
Transparency Helps Unions
Union financial transparency protects union members from corrupt
officers. It also protects the integrity of the union movement
itself. Organized Labor cannot effectively advocate the interests
of workers if its leaders are widely viewed as corrupt and
self-dealing. CEOs order regular audits not because they have
embezzled money from their firms but to show the world they have
nothing to hide. Organized Labor should similarly welcome greater
financial transparency that removes corrupt officers like Tyrone
Freeman to show their commitment to protecting the interests of
Recommendations to Congress
Barack Obama campaigned on accountability and transparency, but
as President his Administration is depriving union members of the
information they need to keep their union officers accountable.
Modernized financial disclosure forms have exposed serious
corruption among top union officials. Since 2001, the DOL has
convicted hundreds of union officials for embezzlement, fraud, and
other crimes. This accountability is essential to protect both
union members and the long-term health of the union movement. If
the President will not protect transparency and accountability,
then Congress must.
Congress should prohibit the DOL from spending taxpayer dollars
to implement new regulations rescinding the union financial
James Sherk is the Bradley Fellow in Labor
Policy at The Heritage Foundation.