Unions, Money, and Mergers

by Carl Proper

Carl Proper

Carl Proper

Money matters to unions. Financial resources are hard to obtain, easy to waste, and essential to union survival. Historically, the effort to accrue or protect a financial foundation has also caused many internal union conflicts, mergers and failures.

Capital’s obvious understanding of the power that derives from fiscal strength explains, among other realities, the persistent – and recently successful — efforts of labor’s corporate enemies to de-fund unions through blocking dues collection. Union leaders, unfortunately, are often untrained and unskilled in managing this critical resource, and may think it is inappropriate or unnecessary for them to learn. Through mismanagement of money, they may defeat the purpose for which they presumably became leaders in the first place – serving their members, or the working class.

This history recounts a struggle between two great and historically progressive unions over leadership, organizing jurisdiction (itself a form of property rights), and inherited financial resources. I focus here on financial issues, not because they were the core of the struggle, but because they are seldom discussed, and critical to labor’s history and future. I will also focus on the roles of labor leaders, who are the financial decision-makers, rather than on the rank and file. In later chapters, questions of leadership character, membership involvement and exploitation, and jurisdictional issues will get their due. One conclusion that I would reach, however, is that open discussion of money matters with union members produces better decisions than haste and secrecy.

The author claims no financial expertise, but over forty years as a member, staff member and consultant for the International Ladies’ Garment Workers’ Union (ILGWU) and its successors, UNITE and UNITE HERE, I observed and participated in a series of union mergers, disputes and breakups. All of these were motivated in significant degree by the desire to obtain, redirect or retain financial resources to accomplish personal or union purposes.1 Many of those resources, though sadly reduced by inter-union disputes and other poor choices, remain today.

I would urge unionists who believe the next revolution will be built without wealth to learn from our experience. The kinds of investments in real estate or banks made by the ILGWU or the Amalgamated Clothing Workers of America (ACWA) initiated decades ago, may now be more essential than ever. They can help unions withstand the loss of dues income in our day, and enable activities of community allies with little or no income base.

A recent paper by Rich Yeselson, “Fortress Unionism,” may offer a context for understanding the history that follows. Yeselson highlights the rejection by the auto industry in 1946 of UAW demands for a voice in management, as well as the passage in 1948 of the anti-union Taft-Hartley Act as turning points in U.S. labor’s subsequent decline. While Yeselson does not need to say it, income-producing wealth and a voice in managing it are the fundamental bases for power in capitalist society. The ILGWU and ACWA (later ACTWU) each achieved a degree of co-management in the industries where they organized. The ACWA founded and owned a Bank that loaned money to industry management, among others. The ILGWU regulated relations between union manufacturers and contractors, through secondary boycott rights retained as exceptions to Taft-Hartley. Control of the ILGWU and ACWA wealth was an objective in the struggle between UNITE HERE and SEIU.

Fortress unionism” is also relevant because a key player in the Progressive War, New England Joint Board Manager Warren Pepicelli, has long subscribed to the Fortress view, that worksite-by-worksite organizing will never restore U.S. labor to its former glory; and the responsibility of the current generation is to preserve a legacy of labor power for the eventual day when the workers of America rise again. This approach worked well for his affiliate in relation not only to employers, but in internal union disputes.

Around the turn of the 20th century, composer Richard Wagner wrote a series of operas in which ancient Germanic gods and heroes fought over the magic wealth of the Rhine Gold. That story ended with destruction of the dangerous wealth. The story has been retold in our time as the tale of furry-footed British hobbits. As in the original, the power of the ring had to be destroyed to save innocent souls.

But innocence is no virtue for labor leaders. And the destruction or loss of wealth hurts members and limits organizing.

In the story that follows, the “gold” accumulated by earlier generations is the object of sometimes brutal struggle. Leaders who carelessly waste, lightly give away, or fail to share resources in time of need place their own and their members’ interests at risk. Those who deploy wealth with courage and wisdom often fare better.

We need to learn from the past, in a time when we cannot afford to repeat its errors.

Andrew Stern, John Wilhelm, Bruce Raynor surround Jesse Jackson at 2004 founding Convention of UNITE HERE.

Andrew Stern, John Wilhelm, Bruce Raynor surround Jesse Jackson at 2004 founding Convention of UNITE HERE.

In 2004, two private-sector unions with strong organizing reputations merged to form a single organization, UNITE HERE. UNITE! (the Union of Needletrades, Industrial and Textile Employees) was the product of earlier mergers, which had brought the ILGWU, the Amalgamated Clothing Workers’ of America (ACWA), Textile Workers of America (TWUA) and several smaller unions together. HERE (Hotel Employees / Restaurant Employees International Union), founded in the 1890s, represented workers mainly in the hotel, food service and casino industries. As its first President, UNITE HERE chose former UNITE President Bruce Raynor, earlier a TWUA and ACWA Education Director and Organizer.

At an intense moment in the secession (2008-2009) from UNITE HERE, led by Raynor, of most former needle trades affiliates, mediator Joe Hansen, President of the United Food and Commercial Workers’ Union, wrote that “bothsides went into the (original merger) agreement with their eyes wide open.” This paper points to some exceptions to that assertion. Sadly, shortsightedness has been as common as wisdom and solidarity in the series of mergers and breakups that led to today’s smaller (but growing) UNITE HERE and the still smaller Workers’ United division of SEIU. As regards the breaking apart of UNITE HERE and the consequent redistribution of that wealth, it is surprising how many union leaders were surprised at the outcome

Roads to growth and division

Beginning in the 1920s and 1930s, both the ILGWU and ACWA, battling to empower impoverished immigrant communities and workers, separately learned the value of money, managed it carefully, and eventually created reservoirs of wealth that attracted merger suitors in decades to come.

In 1926, nearly bankrupt after a mismanaged strike, ILGWU Treasurer and then President David Dubinsky was forced to borrow from members and from sympathetic Jewish financiers to put the union back on its feet. From that time forward, the ILGWU developed a reputation for underpaying staff, providing tiny (but fully funded) pensions to members, and growing funds and investments like a successful investment house.2

Initially on firmer financial ground in 1923, visionary ACWA President Sidney Hillman saw the opportunity to strengthen labor by lending to unions, union members and union companies. In its early years, the fully union-owned Amalgamated Bank was carefully managed and grew steadily, aiding clothing and other workers through financing cooperative housing, managing pension and health funds – and providing bonding or bail money for trade union and other activists. The union was relatively financially strong in other areas as well.

Clothing / Textile Merger

Proper2In 1975, the Textile Workers’ Union of America (TWUA), in the midst of a decades-long struggle to organize the giant J.P. Stevens textile empire, approached for a merger the union that had helped found TWUA in the 1930’s. Understanding that Clothing Workers’ financing would be the key to completing the members’ victory, TWUA President Sol Stetin set ego aside, agreeing to take the third leadership spot in a merged union. ACTWU was born, and the JP Stevens win was just the beginning of its organizing success.

By the 1990s, however, ACTWU’s finances at the national level were stretched thin, and the union’s financially strongest local affiliates declined to bail out their own International. Looking for speedy gains, the Amalgamated Bank, in parallel with many New York capitalists, moved into risky derivative investments, and eventually paid a high price like other speculators.

It was now ACTWU’s turn to bid for a merger with a financially stronger organization, the ILGWU.

ILGWU – ACTWU merger

As befitted a cautious and wealthy union, ILGWU President Jay Mazur explored the merger possibility in discussions over several years with ACTWU President Jack Sheinkman. Formal planning, beginning a year ahead of the actual merger in 1995, was inclusive, with a committee of twelve a second committee of top officers meeting regularly to work through the issues. Merger leaders sent a draft constitution to all affiliates six months in advance of the merger Convention, and national leaders discussed their proposals in meetings with regional affiliates around the country.

Everyone understood that the ILGWU’s jurisdictional base, mostly employed in tiny women’s garment factories, was disappearing overseas and losing out at home to reinvigorated sweatshop competition. But the ILGWU International union owned union buildings in New York and Pennsylvania valued at around $250 million.3 Its benefit accounts were overfunded, and resources in general were professionally well managed by Secretary-Treasurer Irwin Solomon, Mazur and a financially skilled team. The union also managed several “knippels”4 of liquid resources – an Organizing and Strike Fund (estimated at $20 million), an Affiliates Assistance Fund, and several Union Label and Promotion Funds.

President Mazur, approaching retirement, wanted to see the union’s wealth channeled to organizing and growth. ACTWU, based in larger and more technically advanced menswear and textile factories, seemed a good match; it was in a related industry, and a relatively known quantity. The merger was a potential match of money – centralized in the ILGWU national office — with a larger ACTWU membership, both current and potential. But the ILGWU, its wealth placing it in the drivers’ seat, was careful to negotiate protection for its interests.

The final agreement merged UNITE leadership nationally, promoted integration of staff and affiliates, stipulated that the ILGWU President would become the first UNITE President, that merger parties would “use their best efforts” to retain a President from the ILGWU and roughly equal numbers of Vice Presidents from the two unions for the first six years. Providing a buffer for ILGWU resources, the merger would function as more of a limited partnership than a unified organization. Alongside the merged leadership, each union would also continue to exist separately, with its own officers, properties and General Executive Board (GEB), for the time necessary for establishing the merger.

Instability at the Amalgamated Bank was a concern. This led to a mediated decision by just-retired AFL-CIO President Lane Kirkland in the month before the founding Convention, clarifying that neither side was responsible for the debts of the other. Either side could leave the merger at will, and take its property with it, by a two-thirds vote of its own GEB.

The merger succeeded initially as an organizing vehicle, winning major campaigns in the southern textile industry, and accreting laundry unions at a national level. After the International union purchased $23 million worth of shares in the troubled Amalgamated Bank, enough to control 51%, the Bank also returned to strength, opening its first non-New York branches in Washington, DC, New Jersey and California.

Near breakup of UNITE merger

But three years into the merger, when a figure who would disrupt the labor movement for years to come, Executive Vice President and then Secretary-Treasurer Bruce Raynor, moved to oust Mazur and take over union leadership, the merged union was on the verge of breaking apart. As part of Raynor’s attack, New York’s Chinatown-based Local 23-25, formerly Mazur’s Local and now headed by Executive Vice President Edgar Romney, was investigated for Trusteeship, at Raynor’s initiative, charged with putting its financial interests ahead of the interests of the members’.

Responding to Raynor’s move, the ILGWU GEB exercised the “opt-out” provision of the Constitution, voting by a two-thirds majority to end the merger, taking all ILGWU property with them. With funds and real estate – vital for organizing and everyday union business – at risk, Raynor and his allies from the former ACTWU, had to surrender.

In its “opt-out” vote, however, the ILGWU Board had also authorized President Mazur to negotiate a settlement with the former ACTWU if he could. Many on the ILGWU Board believed, at a minimum, that Raynor should be barred from office. But Mazur had seen Raynor from early days of the merger as his most likely and qualified successor, commenting that, “Bruce Raynor’s a son-of-a-bitch, but he’s not going to give away the union.”5 Still trusting in Raynor’s organizing skills, he offered Raynor and Executive VP Ed Clark a fourteen- point settlement, halting disruption for the duration of the six-year period. They signed and then complied.

Shortly after reaching the settlement, by way of extra protection, the still-functioning ILGWU Board voted to return a number of International-controlled buildings to regional ILGWU affiliates. These included an eight-story Boston building managed by the New England Joint Board, where I had served on the staff before (and again after) moving up to the national office. Together with another $25 million redistributed from the Affiliates Assistance Fund, these former ILGWU affiliates were made relatively self-sufficient going forward. The union’s most valuable property, the 28-story, block-long building at 275 Seventh Avenue in Manhattan, which housed the Union Health Center along with paying tenants, was an exception. With an estimated value of $100 million, “275” remained under ILGWU ownership, and under day-to-day control of Local 23-25 Manager and Executive VP Edgar Romney. Following the buildings decision, it was clear that if Raynor eventually gained control of the union, he would not automatically control the property as well.

Mazur was peacefully re-elected as UNITE President at the 1999 Convention, and retired as President on June 30, 2001, with Raynor then moving into the top slot.

The ILGWU had managed its financial inheritance with care, directed it toward growth of a new labor movement, and passed a strong organization on to its 21st century successor.

Alliances, Divisions and Issues in the Raynor UNITE Presidency

Shortly after assuming power in mid-2001, Raynor requested that affiliates transfer ownership of their buildings back to the International Union, under his control. In a fateful meeting of the still-functioning ILGWU GEB, former ILGWU leaders faced a choice that tested their strength and foresight. The decisions made by two of those affiliates greatly affected their powers in the ensuing decade.

The big, affable and well-liked number two leader, now-Secretary-Treasurer Edgar Romney, trustingly passed his $100 million inheritance6 at 275 Seventh Avenue over to the new President’s control.

The New England Joint Board, headed by recently elected Manager Warren Pepicelli, made a different choice. The Joint Board had acquired an eight-story building in Boston’s Chinatown in 1948 (now worth around $10 million), and occupied it ever since, while renting out other space to tenants. The building rent – together with stock the union had purchased in the Amalgamated Bank, and a smaller account in the nationally-managed “pooled investment fund” – was an important supplement to members’ dues. Pepicelli (and some other leaders), with their eyes wide open, declined to hand over their buildingsto the new President. In a separate vote, Pepicelli – not tipped off in advance that his colleagues had already decided to give 275 Seventh Ave. to the International – also voted against that decision.

Romney and Pepicelli then lived with the consequences of their vote. Romney, from that point forward, had the President’s support, while Pepicelli never came off the shitlist. But Pepicelli retained the property and a degree of independence. Romney occupied a building owned by the International union, and was in a position, going forward, where it would be very difficult to say “no” to a strong President.

Pepicelli was a fighter, and a careful manager. In younger days, as shop Steward in an IBEW factory, he had led a challenge to management that led to his dismissal, until the members responded by shutting down production. He still liked to recall the plant owner calling him back to work and parading him around the floor, so that union members would see him and get back to work. Now, inheriting the ILGWU legacy in New England, including the Harrison Ave. building, he felt a sense of obligation to protect that inheritance at any cost, and eventually pass a strong and independent organization on to his successor.

In the near term, placing the President’s good will ahead of property was an advantage to Romney, who became Secretary-Treasurer of UNITE. Later, during the 2008-9 breakup of UNITE HERE, and the formation of Workers United as a division of SEIU, Raynor briefly made Romney the first President of that union. Pepicelli, by contrast, immediately upon assuming New England leadership, saw all of his International-paid Organizers pulled away. Later, following the 2004 merger of UNITE with HERE, he faced unrelenting pressure from the International Union to merge his self-sufficient affiliate with the bankrupt Boston Local 26, a former HERE affiliate Raynor was courting with his own re-election in mind. With encouragement from the International, the former HERE affiliate moved into the 33 Harrison Ave. building and paid no rent for a period of years.

Pepicelli, however, was able to maintain substantial membership without the Organizers, and built a solid membership base as he and his staff negotiated good contracts and prioritized settling members’ grievances. With the advice of his trusted friend and Treasurer Sam Giurleo, he closed unneeded regional buildings, reduced staff, kept dues at an affordable level, and retained the Joint Board’s independence.

Raynor proved a careless, impulsive and divisive President and a poor money manager.

Shortly after gaining control of UNITE,Raynor sold the former headquarters of the ILGWU, a six-story building on Broadway north of Times Square, formerly world headquarters for the Ford Motor Company, for $23 million. The following year, the new owners sold it for twice the price. The original Amalgamated Bank building in Union Square was also sold, along with the Pocono workers’ resort, Unity House, started by the ILGWU in the 1920s, and some other properties.

Not long after assuming the Presidency in mid-2001, Raynor alienated a critical constituency, ILGWU staff retirees, by cutting the life insurance they had long counted on (in lieu of higher wages), from accumulated amounts often in excess of $100,000 to $15,000. After hearing complaints, he cut the maximum again to $5,000. Besides raising the question whether a union employer should emulate a pernicious corporate pattern, this decision placed at long-term risk an eventual $30 million reversion to the union from the over-endowed Death Benefit Fund. (For a retiree reaction to these cuts, see long quotation at footnote (16).

The Raynor administration invariably characterized the building sales, benefit reductions and other financial raids as needed to raise money for organizing. In broad terms, however, while the UNITE merger was initially successful in organizing southern textile plants and accreting a significant industrial laundry sector, growth through organizing in manufacturing sectors could barely slow membership losses. The newly-organized textile mills soon followed the garment industry out of business or out of the USA. Major and expensive campaigns to organize clothing firms Guess? and Peerless, and later the industrial laundry conglomerate Cintas, came to nothing. As early as 2003, the pattern of selling resources to finance ongoing operations led Edgar Romney to warn UNITE’s executive board that “we cannot continue to deficit spend and reduce our assets.”7

Management waste notwithstanding, UNITE continued to attract outside interest just like the 1995 ILGWU. UNITE was still a Rhine Gold repository, but with dwindling membership and organizing jurisdictional “rights” mostly in dying industries. To remain a factor in the labor movement, UNITE needed to merge into a service sector.

UNITE HERE Merger

The Hotel Employees / Restaurant Employees International Union – HERE – founded in the 1890’s, had developed a reputation under President John Wilhelm for never surrendering in an organizing fight, even if that meant picketing for months or years. The union operated in non-exportable jurisdictions – hotels, casinos and food service – that fit the times; and focused strategically on building dense membership in major cities, largely ignoring other areas. While steadily adding numbers and raising standards for member earnings and militance, they now stood where ACTWU once had stood – needing to merge for money. While a few affiliates controlled some wealth, many were dependent on an International office that was itself short on the cash needed to grow.

HERE President, John Wilhelm, had first come to public attention as he led the organization of Yale staff while still a student there. In 2003 HERE had joined with UNITE, and several other organizing-driven unions in forming a New Unity Partnership intended to reform the AFL-CIO. Both UNITE and HERE represented immigrants primarily, and had jointly led the 2003 Immigrant Workers Freedom Ride. As a “getting to know you” joint action with HERE, busloads of UNITE members had joined HERE’s successful Yale picket line in New Haven a year before their merger.

A significant difference between the two unions was that, like ACTWU before it and in contrast to the ILGWU and UNITE, HERE operated with decentralized wealth and control.

As 2004 approached, once again a union with great organizing commitment sought merger with a union with strong finances and a dying jurisdiction. And, as in the ILGWU-ACTWU merger, the union with the money would control the initial process.

Steps leading to the 2004 merger and draft constitution, however, were the opposite of the 1995 ILGWU-led process. In contrast to the year-long open discussion within both unions of the prospective merger, the first UNITE HERE Constitution was drawn up in secret discussions between the two Presidents only. Raynor largely dictated the terms, explaining that “we’re not going to get into a lot of debate and discussion about the merger. We’re just going to merge.”8 In an interview six months before the merger Convention, even UNITE Executive VP Ed Clark acknowledged that “I have no inside knowledge of how the merger between HERE and UNITE came about, or how the merger document that people are going to vote on in July looks.”9 Nearly every delegate, Vice Presidents like Pepicelli included, saw the governing document they were to vote on for the first time at the merger Convention.

Despite his near-total control, Raynor failed to negotiate any protections for his team or himself — the kind of “pre-nuptial agreement” the ILGWU had demanded and later used to its advantage. His intention was to focus on the former HERE jurisdictions, leaders and employers, winning their favor and bringing those of his former allies who could do the same along with him. Though he would now sit where President Jay Mazur had sat before him, atop a membership majority committed to its own leaders, he expected to win them over as he had earlier won significant ILGWU support from leaders seeing him as the voice of the future. Though UNITE had been “married” for its money, as the ILGWU had been, Raynor was confident he could earn HERE’s love and respect, and took no precautions on behalf of himself or other former UNITE staff and members.

The Raynor-drafted Constitution, ratified with very little discussion at the merger Convention, granted extraordinary powers to two Presidents – a radical contrast with the former HERE structure based on strong regional leaders.

As in the ILGWU-ACTWU merger, the opening advantage lay with the wealthier team. In addition to leading health and pension fund Boards, Raynor chaired the UNITE-dominated Board managing 275 Seventh Avenue, and sat as President of the Amalgamated Bank. Hospitality Division President John Wilhelm and three other former HERE officers served as a minority with 16 former UNITE leaders, including close Raynor ally and former UNITE Organizing Director Mark Fleischman, on the Amalgamated Bank Board. Raynor loyalist Edgar Romney led the ILGWU Death Benefit Fund.

Observers with a memory of previous merger battles should have understood that control of these assets would shift to the team with the most votes after the second Convention. Many on the UNITE side, however, expected that Raynor would protect their interests, and were stunned a few years later when much of their legacy did change hands.

As in earlier combinations, money from the UNITE HERE merger quickly led to organizing success in key jurisdictions, including victory in a long-fought Atlantic City strike, and wins in hotels across the country. Organizing-focused industry “Conferences” were formed for Gaming and for Hotels, but there was no Conference for the former UNITE jurisdictions of manufacturing, distribution and laundries until near the end of Raynor’s administration.10

In some regions of the country, the merger proceeded smoothly. Former UNITE Vice Presidents, including David Melman in Pennsylvania and Noel Beasley in Chicago, successfully formed and led Joint Boards that included both former UNITE and former HERE Locals. The same was true in some HERE-led areas. In other areas, however, cultural differences between the two merger partners were never resolved. President Raynor, in particular, proved unable to win the allegiance of key Vice Presidents from the former HERE – a reality he did not fully understand until late in his term of office. His top-down constitutional structure and unwanted interference in union- employer relations left him as isolated as first UNITE President Jay Mazur’s lame-duck status had once left him.

Secession from UNITE HERE

BEST OF FRIENDS – UNITE VP Clayola Brown, John Sweeney, Bruce Raynor, Edgar Romney (from behind) at Yale strike, New Haven, 2003)

BEST OF FRIENDS – UNITE VP Clayola Brown, John Sweeney, Bruce Raynor, Edgar Romney (from behind) at Yale strike, New Haven, 2003)

In the Fall of 2008, less than a year before the July Convention where general officers would be elected, three key and financially independent Vice Presidents from the former HERE – D Taylor, head of the iconic “Culinary” Local 226 in Las Vegas (and future President of UNITE HERE), powerful New York Local 1 Manager Peter Ward and Los Angeles leader Mike Casey -met with Raynor. They informed him he did not have their support, and in all probability would not be re-elected. His override of HERE traditions, beginning with the top-down constitution, and followed by repeated Presidential interference in local negotiations, had left him without support from the majority faction of the union.

The foolhardy failure to add “opt-out” language to the constitution in the event of irreconcilable differences now left many former UNITE leaders, like Raynor himself, in a desperate position. Rather than seeking a negotiated solution, Raynor proposed secession from the union without any Constitutional basis. But the original UNITE merger objectives were not abandoned. The UNITE side would gamble, using union resources, to wrest both the former HERE’s hotel / casino jurisdiction and the financial assets UNITE had brought to the merger from the union to whom they now belonged. With such a dowry, another union would be glad to welcome Raynor and whomever he brought with him into a new merger.

This meant war.

The decision to secede, which risked the resources on which members’ security depended, was made with no discussion with the members.

Seeing no alternative to Raynor’s leadership, the former UNITE General Executive Board went along with his risky plan, though not without some debate. By January of 2009, however, Pepicelli’s New England Joint Board was the only holdout. As a GEB member, and Board member on the Health and Pension funds, Pepicelli participated in all early planning meetings, but voiced doubts about the legality of the secession, and made no recommendation as to which way his affiliate should jump.

In late 2008, secession battle plans were summarized by Raynor Special Assistant Keith Mestrich in a one-page “Major Goals” document. Component 2 was “Retain Control of Key Assets,” identified as:

  • Amalgamated Bank of New York
  • National Retirement Fund (which owned the Amalgamated Life Insurance Company – ALICO)
  • Staff retirement Fund (co-owner of ALICO)
  • National Health Fund
  • 275 Seventh Avenue, the union headquarters building (Pres. Wilhelm also maintained a headquarters in Washington, DC)
  • Death Benefit Fund

Not listed as assets, but also involved as weapons in the struggle were what remained from other ILGWU “knippels11,” including the Strike Fund and Affiliates Assistance Fund, as well as the “Pooled Investment Fund” managed by the International union on behalf of many affiliates. An investigation by the Public Review Board, originally created to watch out for corruption in the pre-Wilhelm HERE, found that around this time, Raynor had arranged to move $12 million in cash and more than $3 million in other assets from the union’s main account to locals loyal to him.12

The stated objective of all these actions was: “[O]ther side realizes that when they wake up in control of the union on July 3, 2009 (post-Election day at the Convention) that they in fact have won nothing – no assets to control.”

The “other side” was the union formed in the previous Convention – UNITE HERE.13

Merger with the Service Employees International Union (SEIU), headed by Raynor friend and ally Andrew Stern, was not included in the opening discussion, but was probably in Raynor’s mind, and on everyone’s agenda by the end of the first month of the ensuing war.

War strategy depended on surprise, haste, bold misstatement of facts, UNITE-side solidarity, a weak UNITE HERE response, and a quick victory – no assets for UNITE HERE to control.

Raiding the Funds

The former UNITE’s public moves to “retain control of assets” began with stunning unanimousUNITE-side votes at the December 6 meeting of the Amalgamated Bank Board. These put in place “Amended and Restated” bylaws. The new rules replaced the annual election of Directors with three levels of staggered terms (“a common tactic for warding off challenges to Boards,” according to the Pensions and Investments website)14; replaced majority voting with a 75% supermajority requirement for “significant transactions, or to call a special shareholders meeting; and replaced nomination of Directors by the whole Board with a new, five-person “Nominating Committee” including only UNITE-side Directors. The nominally neutral and professional bank President, Derrick Cephas, supported the UNITE-side majority15.

The immediate effect of the revised Bylaws was to disempower the UNITE HERE Board minority, and facilitate their eventual replacement. On January 22, 2009, remaining democratic pretenses were dropped, and co-President John Wilhelm and his assistant Matthew Walker were simply voted off the Board.

In addition to opening to political abuse an institution that, when well-managed, had been of extraordinary value to the labor movement, the new rules also amounted, in the words of Joann S. Lublin of the Wall Street Journal, to “corporate-governance practices that [the Amalgamated Bank Board] has opposed as an activist investor in other companies.”16 Rather than protecting investors, the new structure simply empowered Board members to the potential detriment of the Bank.

The struggle for control of the “Rhine Gold” was under way.

Despite the Board changes, majority bank ownership still rested with UNITE.

In succeeding months, the UNITE side was able, through various ruses, to shift majority Bank ownership to its side.17 These mainly involved arranging purchases of Bank stock by UNITE-side-controlled Funds, including the member and staff Retirement Funds, and the Pooled Investment Fund. In addition, in 2010 the Bank issued $70 million in new stock, which also tended to dilute the shares held by UNITE HERE affiliates. Fund regulators raised questions as to whether the bank stock purchases were being made in the interest of the Funds – as required by law – or of the Bank and Bank management, but the shift was accomplished.

Following the Bank Board coup, similar votes were taken by UNITE-side majorities for the union’s merged retirement fund, health fund, staff pension fund, and the corporation managing the building at 275 Seventh Avenue.18 Because the members’ retirement fund and the health fund were regulated “Taft-Hartley” entities, with the union and employers each holding half the seats on the governing Boards, there were limits on what changes could be made. In addition, Warren Pepicelli and other UNITE HERE Directors retained their seats on the pension boards during the war, and up to the present day, resulting in some cooperation between the two unions on behalf of the membership. President Raynor’s influence over the employer members, however, was sufficient for the UNITE side to amend the rules to allow Board participation on the nominally UNITE HERE funds by officers of affiliates seceding from the union.

As for the all-ILGWU / UNITE Death Benefit Fund, to obtain initial UNITE-side control, it was only necessary to amend the Trust Agreement to allow non-UNITE HERE members – soon to be the entire governing Board — to serve on the ruling council. That control was soon effectively challenged, however, by a group of former ILGWU retirees.

ThisFund for former ILGWU members and staff, it was estimated, would retain a value from $30-$50 million after the last beneficiary collected. While most of the former ILGWU was now affiliated with Workers United / SEIU, the Retired Officers of The ILGWU, an organization chaired by former member and later New Jersey Manager of the union, Manny Leventhal, was a bitter enemy of Bruce Raynor. As UNITE President, he had cut their long-promised life insurance from over $100,000 in many cases to $5,000 – and refused even to meet with them to discuss it.

On October 20, 2009, a day before returning to their former 275 Seventh office, the Retired Officers filed a lawsuit19 asking that control of the Death Benefit Fund revert to UNITE HERE. By way of explanation, they released a passionate eight-page open letter to the labor movement and the media.20 In it, they detailed Raynor’s mistreatment of retirees, along with other instances of malfeasance as they saw it. The broadside included an interview with a recent widow, whose ILGWU husband had learned virtually on his deathbed that the inheritance he had long promised to his family was now reduced to less than the costs of burial. In May of 2010, the Staff Retirees organization formally left Workers United and affiliated with UNITE HERE.

UNITE-side / Workers United moves to win control of what was probably the most valuable physical asset of either union, the building at 275 Seventh Avenue, soon became part of a much larger lawsuit involving UNITE HERE and the secessionist group.21

As noted earlier, Edgar Romney, as UNITE Executive Vice President, had agreed in 2001 to turn ownership of the former ILGWU building over to UNITE. It had then become property of the UNITE HERE International union as part of the 2004 merger. There was no managing Board, just a single “member,” UNITE HERE.

Nothing daunted, on December 8, 2008, agents for Raynor’s faction filed “Restated” Articles of Organization for the building corporation, creating a managing Board with Raynor and five other UNITE-side allies as “Managers.” The building office was relocated to West 34th St., from which it would be managed on a daily basis by UNITE-affiliated National Corporate Research, LLC.

UNITE HERE, however, still owned the building, and continued collecting rents.

Control of the building then became part of the umbrella lawsuit cited above, merging charges filed by the UNITE side and counter-charges filed by UNITE HERE, in United States District Court for Southern New York, Judge George B. Daniels presiding.

Over the summer of 2009, UNITE-side Vice President Mark Fleischman, a former Organizing Director for UNITE, began visiting private tenants of the building and advising them to put rent payments due to UNITE HERE into escrow until control of the building was settled. Fleischman then stepped further over the line by using his dual role on the managing Boards of both the Bank and the building to reverse a regular UNITE HERE fund transfer of $9 million from the Amalgamated Bank account where rents were deposited to the General Account of the union, controlled by UNITE HERE.

When this interference with normal management of the building came before the Court, Judge Daniels tipped his hand UNITE HERE’s way: “You tell Mr. Fleischman,” Daniels directed Workers United’s attorney, “that I said he should have nothing to do with the management of this (building) company…If I am a member of an organization, and … I decide to disassociate myself from that organization, I don’t get to pick and choose what I think is individually my property and take it with me… If that was true, we wouldn’t have fought a civil war.22

He also addressed the Amalgamated Bank’s inappropriate involvement in the union dispute, instructing Workers United’s attorney: “tell the bank not to interfere… I don’t want to be talked to in a way that is disingenuous….They are not a disinterested party here.”2324 The building was still UNITE HERE’s.

As for the “knippels,” toward the end of December, 2008, aiming to limit the size of any former HERE war-chest, pro-Raynor management froze all “Pooled Investment” funds, on which many affiliates – including former UNITE affiliates — depended to run daily operations. Understanding in advance what was about to take place, the still-uncommitted Warren Pepicelli phoned New England Treasurer Sam Giurleo from the plane on his return from the leadership meeting where the plan was considered. Giurleo immediately withdrew New England’s investments from the pool. Only New England then had these liquid assets to run operations through the rest of the war.

Local union funds were also brought into play when, in January, President Raynor assessed seceding affiliates $500,000 apiece to finance the rest of the war, beginning with a virulently anti-union internet campaign, and moving on to decertification and disaffiliation campaigns – “raids” – lawsuits and contests for employers’ favor. From this point forward, many former UNITE affiliates were financially strapped, and Regional Managers were in potential personal legal jeopardy for misappropriation of union funds.

The position of the New England Joint Board was unique and pivotal in the overall struggle, and also illustrates the potential and effects of managing the crisis in a way that was both more open and more calculated. I’ll lay out some of the Joint Board’s approach before returning to the overall financial struggle.

New England Vice President and Manager Warren Pepicelli used the month of January to review the situation created by the decision of leaders he referred to as the “white boys,” at the top of the union. This included conversations with staff, rank-and-file leaders, members of the GEB on both sides, and with Presidents Wilhelm and Raynor.

UNITE VP Al daCosta, Bruce Raynor, Warren Pepicelli

UNITE VP Al daCosta, Bruce Raynor, Warren Pepicelli

Consistent with ILGWU tradition, Pepicelli deliberated carefully before making a decision.

As the battle opened, the Joint Board was facing a January Trusteeship (takeover) backed by BOTH Presidents, designed to compel him to merge his affiliate with hotel Local 26, which had moved into the Joint Board building to resolve its financial difficulties, and was paying no rent. Raynor had originally favored the trusteeship as a way of winning former HERE support. For Wilhelm, support for Local 26 was the “default” position. He had never had a conversation with Pepicelli outside of formalities at the VP get-togethers.

Pepicelli’s decision-making process contrasted with the rushed and peremptory approach of many of his peers. Early reports to staff and rank-and-file leaders bluntly described the member-free initial decision process by Raynor’s group, his disgust at both parties for subsequently lining up member against member to denounce each other, and his determination to protect the Joint Board and the legacy that had been passed along to the current generation of members, and to him.

Though both Presidents had previously been prepared to trustee the Joint Board, both now dropped that proposal and urged Pepicelli to join their side. Legally, the Joint Board’s decision would be important. Raynor’s defense for seceding with no Constitutional basis was that there was a “schism” between the two sides, with 100 percent rejection of the merger by one partner. On that basis, the former UNITE side could and did claim that the merger had simply not “taken.” In effect, no divorce was required; the marriage should be annulled. By standing pat, Pepicelli might disqualify that argument.

Pepicelli outlined the situation to staff in mid-December, and to New England Joint Board’s rank-and-file Executive Board on January 12, 2008, conveying essentially the same message to both. He was “embarrassed” to report what was taking place in the union. If the unions fought each other, employers would take advantage. New England was the only former UNITE affiliate not committed to leave the union. The Trusteeship threat was now probably moot. No vote would be legally required to remain IN the union, but there would be votes. It would be painful if they were eventually separated from former ILGWU and ACTWU brothers and sisters. But his major concern was protecting the Joint Board and the legacy left to them by earlier generations. If they left the union without a legal basis, they might lose their building and their ability to function as a Joint Board.

Around the 4th of February, Pepicelli held his first serious conversation, by phone, with President Wilhelm. He had had years to form an impression of the man, and judged that Wilhelm, in contrast to Raynor, would keep his word. He asked for, and received assurances that, if New England remained in UNITE HERE, they would not be trusteed, not be asked to merge with Local 26, and would retain the Harrison Avenue building and other resources. Pepicelli then assured Wilhelm that New England would stay, as long as his rank-and-file leadership concurred.

On February 6, he met individually with Raynor, in Raynor’s office, to convey the same message.

On February 12, he met with thirty delegates and Local officers from around the region to explain the situation to them. He warned the rank-and-file leaders they should expect to receive phone calls from UNITE members or leaders urging their affiliates to leave UNITE HERE. Some had already been called.

New England Joint Board President Bert Barao, with Joint Board Secretary Evelyn Moniz

New England Joint Board President Bert Barao, with Joint Board Secretary Evelyn Moniz

On Friday, February 20, the New England Joint Board Executive Board considered a Resolution to remain in UNITE HERE. President Bert Barao, a tailor at Macy’s and formerly with ACTWU, had close friends among both rank-and-file and staff of the former UNITE, as did some other Board members. He had been contacted directly by Edgar Romney, whom he knew from earlier decades on the Civil Rights committee, and had a sit-down dinner with a former UNITE VP sent by Raynor. While the rest of the E-Board was prepared to vote with Pepicelli, Barao was undecided. Pepicelli chose not to call a vote without his backing. Two days later, Barao phoned him at home to express his support for remaining. A telephone vote by other E-Board members settled the issue unanimously.

This was the critical vote, since the next meeting of the full Joint Board would not be until after the Convention.

New England’s vote had strategic effect. There was no schism.

Wilhelm, Pepicelli and Barao came from three different unions. Their decisions to ally with each other were based on consideration of alternative paths, and on trust in each other’s word. 25

In early May, now-Chief of Staff Keith Mestrich presented Raynor and Stern with a battle assessment reminiscent in its honesty of memos from Hitler’s professional military leaders in the aftermath of the Allied landing at Normandy. While UNITE had counted on creating a financial crisis for UNITE HERE, it was the secessionist group, even after the March merger with SEIU, that was hurting. (C)hanges in economic assumptions,” Mestrich noted, “have altered Workers United’s short-term finances.”26

The principal cause of Workers United’s financial difficulties was evident in the memo’s recurrent reference to “the lack of a settlement with UNITE HERE” — apparently unexpected. The document lists the following among the union’s challenges:

  • Amalgamated Bank was paying no dividends, including to “at least three affiliates that depended on their Amalgamated Bank dividends to conduct regular business.” 27
  • Evicted from 275 Seventh Avenue, Workers United needed to find new space, purchase new computers and other equipment and do without rental income from the building.
  • A strong UNITE HERE response to Workers United raids on affiliates was requiring W.U. staff to play “defense,” rather than engage in organizing or other “offensive” actions.
  • A sharp decline in dues payments, including the loss of 9,000 New England Joint Board members, and escrowing of dues by employers claiming they did not know to which union they should be paid.

Mestrich’s recommendation was to renegotiate the original agreement with SEIU, which had been made just a few weeks before. Rather than bringing a generous “dowry” to SEIU, Workers United was becoming a burden. As the Memo notes: “The financing provisions of the agreement [with SEIU] were not negotiated with…a budget for Workers United. No estimates of staffing needs or fixed costs were prepared.”

The hasty secession plan and subsequent merger had repeated the careless approach to the original UNITE HERE merger.28

Mediation and Settlement

Shortly after the former UNITE side convened to form Workers United, and then merged as a conference of SEIU (March 21-22, 2009), leaders of the three unions met for negotiations. These were mediated by United Food and Commercial Workers Union (UFCW) President Jor Hansen, a partner in the now-floundering Change to Win coalition. With UNITE HERE still looking to restore the pre-war status quo and SEIU dreaming of swallowing the rest of UNITE HERE and its assets, there was little headway made. Hansen underestimated the relative strength of the major parties, and the commitment of UNITE HERE to the New England Joint Board’s decision. His mediation proposal, however, did roughly outline the elements of the agreement reached more than one year later. Hansen listed the “physical assets” at issue as: the Amalgamated Bank, the UNITE HERE GeneralFund, the Strike Fund, the ILGWU Death Benefit Fund, and “Real estate assets in NewYork.” His recommendation was that Ownership of the Amalgamated Bank [and] the headquarters building in New York City should remain with the membership of the former UNITE, but a financial settlement with HERE remains necessary for the future viability and health of the union.”29

One of the underlying concerns,” Hansen noted,is thatthere has not been a proposal constructed that would leave HERE as a viable standalone union- as the merger dissolved.” This reflected the dispute ongoing at that time over ownership of 275 Seventh Avenue.

The July, 2009 Convention proved a turning point in the war, with 27 Presidents of International Unions and several heroes of the labor movement endorsing UNITE HERE’s no-raiding / no-divorce agenda. The New England Joint Board delegation was the first group welcomed to the stage. The convention debated and approved a radically new constitution that restored power to affiliates, and democracy to decision-making. Wilhelm was re-elected by acclamation, and Pepicelli was elected an Executive Vice President, with a constitutional guarantee for the Joint Board’s independence.

In November, 2009, mediator Hansen updated his settlement recommendations in a memo to “John, Andy and Bruce.”30 He noted there were “approximately $90 million in liquid assets available for settlement,” but also liabilities including pending “judgments and legal actions that could total $30 million.” He had changed his earlier recommendation that both the building and the bank should go to Workers United; now he suggested these assets be equally divided, both going to the unions that actually controlled them – the bank to W.U., and the building to UNITE HERE. He would also “reward” both the Death Benefit Fund and the membership of the New England Joint Board to Workers United. That was to change before a settlement was actually reached.

But the fight carried on for another year, to the bitter end.

And it must be said: The almost two-year war between formerly merged unions produced endless stress for leaders, needless distraction and risk for members, disgust and wonderment for many trade unionists and their supporters, huge frustration for political activists and leaders who had expected Labor to focus on passing Labor Law Reform and electing a friendly Administration and Congress, confusion for UNITE HERE, SEIU and Workers United employers , great entertainment and opportunities for mischief for anti-union employers and their allies, millions of dollars in legal fees for attorneys and judges, and millions of wasted dues and other dollars spent on union staff and members’ time . From oppositional websites that drew from the worst techniques of union-busting employers, to raids that pitted union brothers and sisters against each other in defense of elected officials’ jobs, to union disaffiliation and decertification campaigns that are generally among unionists’ worst nightmares, to battles for property that the sweat and frugality of earlier generations had earned, and to public shame for a labor movement struggling to remain relevant in a world of advancing capitalist domination; the war dragged on.

As in all wars, there were also examples of courage, strength and commitment to principle.

In late July, 2010, a settlement was finally announced. The terms were significantly more favorable to UNITE HERE than those envisioned by mediator Hansen and many others in early days of the war. Notably, while Hansen (with the goal of keeping industries together) would have returned the New England Joint Board to Workers United, despite New England’s votes to the contrary; and would also (with the goal of holding the former ILGWU together) have awarded the Death Benefit Fund to Workers United, John Wilhelm stood by his friends. Both groups, with their funds and assets ended up where they chose to be, in UNITE HERE.

A critical prelude to the settlement was the resignation in May, 2010, of SEIU President Andrew Stern. Stern had lost union and public support because of his simultaneous assault on UNITE HERE and on one of SEIU’s own affiliates, the Union of Healthcare Workers, headed by charismatic leader Sal Roselli. His resignation was quickly followed by the defeat of his preferred successor, Anna Burger, who had headed the Change to Win Federation, and the election to the Presidency of SEIU Executive Vice President Mary Kay Henry.

Henry recognized the hopelessness of what had initially been foreseen as a quick defeat of UNITE HERE, and moved within a few weeks to put the war behind her. In his July 26 victory announcement, Wilhelm credited “new SEIU President Mary Kay Henry for personally devoting her energy to making this agreement. For the sake of workers and the labor movement, I hope that this is the first step in making SEIU the great Union it can be under her leadership.

UNITE HERE is proud that the agreement preserves its exclusive jurisdiction to organize in the hotel and gaming industries. It also lays out a level playing field for both Unions in the food service industry.

And it restores to UNITE HERE the bulk of the financial assets that have been tied up in federal court, including the Manhattan real estate.”

UNITE HERE and SEIU agreed to seek approval from federal regulators to transfer ownership of the Amalgamated Bank to SEIU-affiliated Workers United.31

In the final settlement:

The Amalgamated Bank went to Workers United / SEIU. But individual UNITE HERE affiliates owning Bank stock, including future President D Taylor’s Las Vegas Local, and the New England Joint Board, retained their shares.

International union stock from the Pooled investment Fund, invested in the Bank, went to Workers United.

The Building – 275 Seventh Avenue – went to UNITE HERE.

The Death Benefit Fund, as the Retired Staff had asked, went to UNITE HERE.

Affiliates’ investment funds were divided.

Benefit Funds were divided between the unions, so that members did not lose coverage32.

Dues escrowed by employers were transferred to the respective unions.

Numerous lawsuits and legal charges were dropped or assigned to arbitration.

Jurisdictions were largely awarded to the union where they had originally resided. However, the New England Joint Board was given continued jurisdiction in manufacturing, warehouses and industrial laundries in its region.

As labor reporter Harold Meyerson summed it up for American Prospect, “UNITE HERE plainly won the lion’s share of its demands…President John Wilhelm ‘should be’ extremely pleased.”33

Subsequent events have only reinforced that impression.

Postlude

In late 2010, Bruce Raynor once again resigned a union Presidency (of Workers United) before being fired, facing charges for misappropriation of Funds, a few months after Henry assumed the SEIU Presidency. Chicago and Midwest Regional Joint Board Manager Noel Beasley was elected President.

UNITE HERE President John Wilhelm retired honorably, and loved by many of his fellow leaders and members, at the end of 2012.

D Taylor was elected UNITE HERE President – the first President to enjoy from the start a strong and reliable non-dues source of income to the International Union office, from the building at 275 Seventh Avenue. This represents some shift in power within the union.

The Bank had been wrongly perceived by many outside the ILGWU or the former UNITE as the most valuable physical asset of the union. Though now under new and better management, it may still be following the troubled path it has followed except during the Presidencies of Sidney Hillman of ACTWU and Jay Mazur of the ILGWU and UNITE.

On April 11, 2012, Steven Greenhouse reported in the New York Times34 that:

Amalgamated Bank, long the nation’s only union-owned bank, announced [Wednesday] that two financiers who offered it a lifeline — Wilbur L. Ross Jr. and Ronald W. Burkle — had closed a deal giving them 41 percent ownership in the bank. Amalgamated had sought the [$100 million] investments from Mr. Ross, a prominent investor in the steel and coal industries, and Mr. Burkle, a supermarket magnate, after the New York State Banking Department ordered the bank to increase its capital ratio…”

It is no longer a completely union-owned bank. And, it has paid no dividends since 2008.

Observations

On the evidence noted in this paper, and my own experience, I can make certain observations. Readers, of course, can make their own.

  • The unions that were financially successful generally had a trusted, conservative Treasurer, and an overall leader committed to maintaining and building the legacy, not raiding the funds for immediate gain. This was true for ILGWU President David Dubinsky and Treasurer Shelley Appleton; for ILGWU President Jay Mazur and Treasurer Irwin Solomon (and later advisor Lloyd Goldenberg); and for New England Joint Board Manager Warren Pepicelli and Treasurer Sam Giurleo. Amalgamated Clothing Workers President Sidney Hillman was both a great Organizer and an outstanding financial manager, a rare combination. He may also have employed a strong financial manager; I don’t know.
  • Union organizing and the management of large organizations require different skills.

Organizers always take risks, and may expect to lose as often, or more often than they win. Managers also take risks, but must also consider the medical adage: first, do no harm.

Presidents and regional Managers must manage resources of all kinds after they are organized or otherwise acquired. Simply hitting your target over the head and taking the money does not assure long-term success.

In trying to take over UNITE before the agreed-on time, and in breaking with the AFL-CIO and UNITE HERE, Bruce Raynor was both a risk-taker and a waster of resources. His fellow ACTWU leaders and members made gains in merging with the ILGWU, and lost them in the merger and the breakup of UNITE HERE.

ILGWU (then UNITE) Presidents after David Dubinsky managed cautiously, organized relatively little, but conserved financial resources that still enable union organizing eighteen years after the ILGWU as an independent union ceased to exist.

Careful financial management, well thought-out and openly explained decisions – and unshakable commitment to member service — allowed Warren Pepicelli to maintain his “fortress” against a hostile union President and labor and economic turmoil; but have not led to organizing success.

David Dubinsky, Sidney Hillman, John Wilhelm and D Taylor appear to have mastered both membership growth and retention. Organizer Taylor now has resources to defend which prior HERE Presidents did not have – and a more challenging political environment than any predecessor. How he handles the opportunity will have great impact on the future of the labor movement.

  • Union banks (financial resources) and rentable buildings are long-term resources for workers. Treating them as cash-on-hand robs workers of their patrimony. Putting them in the hands of irresponsible leaders is a mistake that will haunt those who do so. Steady, non-dues income creates opportunities for the long-term survival or growth of pro-worker organizations of all kinds.

The value of ACWA’s Amalgamated Bank and the ILGWU’s building at 275 Seventh Avenue is attested by the mergers and takeovers they attracted. Within the ILGWU, and among former ILGWU officials, there was little doubt as to which resource was more reliable. The Bank went through repeated boom-and-bust cycles (though it escaped damage from the Great Depression, under ACWA President Hillman’s careful management), resulting both from instability in the larger economy and from union management with quick growth, short-term delusions. The building, on the other hand, still housing the historic Union Health Center among its many tenants, has been a steady source of income, as well as space. Union buildings in other parts of the country, like the one in Boston’s Chinatown, are also reliable sources of strength.

  • In a fight, trust matters. One should verify wherever possible, but in a crisis, you must judge who will have your back, or not. John Wilhelm, Warren Pepicelli and Bert Barao found they were right to trust each other. In this author’s opinion, Bruce Raynor pursued his personal goals with insufficient regard for the interests of those who trusted him. His followers paid a high price.
  • Unions differ in the degree of centralization vs. independent regional leadership. Who holds the money is a key factor. Whether one structural model or the other is more beneficial to the labor movement is an open issue. The answer depends on the readiness of affiliates, financially independent or not, to play as part of a team, rather than simply going it alone. Several examples follow:

ACTWU had a number of regional affiliates that preferred to play alone. One Connecticut-based Manager out of the Textile Workers Union, for example, tried with some success to organize anything that moved, from textiles to machine gun factories. The members were always represented, but after his retirement, rank-and-file leaders from those facilities began to contribute more to the labor movement as a whole. Leading up to the UNITE merger, ACTWU’s organizing program was placed at risk when well-off affiliates refused to help out their national union at a critical time.

ILGWU affiliates, normally in debt to a strong International, were part of a team, and active when the International took the lead. But their loyalty to International leadership was uncertain.

Edgar Romney and Warren Pepicelli made opposite decisions with regard to ceding inherited wealth and power to their International union. The choice to hold on to the power you are given, in this instance, proved more successful

In the early 2000’s, several independently powerful HERE affiliates stood aside when their International looked for financial backing. But later, those leaders led the defense against Raynor’s raiders when UNITE HERE was threatened.

As regards centralization vs. regional independence, what lesson can we draw from this history? I would say that finding a balance – the middle path – is best. In the words of Rabbi Hillel (from a tradition familiar to early garment workers):

If I am not for myself, who will be?

If I am only for myself, what am I?

If not now, when?”

1 This is not to suggest that other factors, including the individual character of union leaders, are less important than their financial acumen. But those would be topics for a different paper.

2 While tending to its financial base, the ILGWU engaged in a series of general strikes, including, in August, 1933, a strike of 70,000 garment workers in New York, New Jersey and Connecticut, which persuaded industry Associations to grant the union the power to regulate outsourcing going forward. Wealth management was a sideline that made growth possible.

3 Press release from Retired Officers of the ILGWU, Emanuel Leventhal, Chairman, August 6, 2009

4 This Yiddish term for a housewife’s cash for necessities, typically tied in a cloth handkerchief, was used by the ILGWU to describe funds not under government regulation.

5 Carl Proper interview of Ed Clark

6 Some other former ILGWU affiliates also owned shares in the building

7 One year after the UNITE HERE merger, Service Employees’ International Union (SEIU) President Andrew Stern led a split of unions reputedly committed to organizing first, with politics a distant second, out of the AFL-CIO, and into a new “Change to Win” coalition. Raynor brought UNITE HERE into the coalition, where they joined also with the Teamsters, United Food and Commercial Workers, Carpenters and Farmwokers. This second split, seven years after Raynor’s near-breakup of UNITE, proved an omen of further instability to come.

8 Conversation with Warren Pepicelli.

9 Interview with Carl Proper

10 One year after the UNITE HERE merger, Service Employees’ International Union (SEIU) President Andrew Stern led a split of unions reputedly committed to organizing first, with politics a distant second, from the AFL-CIO. Raynor brought UNITE HERE into the new Change to Win (CTW) coalition, joining also with the Teamsters, United Food and Commercial Workers, Carpenters and Farmworkers unions. In the 2009 UNITE HERE Convention, Wilhelm led UNITE HERE back to the AFL-CIO. Raynor’s CTW affiliation may have led him to think of future merger with SEIU. Together with his – later mended – break with Jay Mazur and the ILGWU, the break with the AFL-CIO may be an indicator of Raynor’s restless or unstable personality.

11 A knippel is a Yiddish term for a housewife’s savings tied in a knot in a handkerchief. The Jewish-led ILGWU occasionally used the term to include a variety of liquid union funds for different purposes.

12 Memorandum from Public Review Board of UNITE HERE to Lanny Breuer, Assistant Attorney General, Criminal Division, U.S. Department of Justice, et al.

13 The union formed in the 2004 merger, UNITE HERE, has never changed its name. Most affiliates of the former UNITE did change their name, in March 2009, to Workers United, which merged with SEIU the day after its founding Convention, and now exists as the Workers United conference of SEIU. I will sometimes refer to the former UNITE group as the “UNITE-side,” up to the point where they become Workers United.

14 “Activist Credibility Gap,” Pensions and Investments, Crain Communications, Inc., March 9, 2009

15 John Wilhelm letter to Derrick Cephas, 6/10/09.

16Union-Held Bank Drops Its Stance?”, Joann S. Lublin, WSJ, December 6, 2008. Lublin noted that “Mr. Raynor also is a co-chairman of the Council of Institutional Investors, a Washington group that represents more than 140 pension funds. He has urged member funds to push harder against staggered terms and supermajority voting, a Raynor acquaintance recalled.”

17 In addition to the International Union’s ownership, some UNITE HERE affiliates also owned – and continue to own today – stock in the Amalgamated Bank, which would presumably have been voted in the interest of UNITE HERE control.

18 In testimony for the Federal Court, Southern New York District, on 4/30/09, Pres. Wilhelm summarized Raynor/UNITE’s financial takeover measures as follows:

Mr.Raynor and his allies:(1)changed the governance structure of Amalgamated Bank,owned by the union,in order to prevent the union from exercising control and perpetuating Raynor and his allies in office as the Bank’s directors and officers;

(2)changed the governance structure of the benefit plans sponsored by UNITEHERE International Union to prevent the International Union from appointing trustees and to perpetuate Raynor and his allies in office as trustees;

(3)changed the governance structure of the non-profit corporation that owns the union’s headquarters building at 275 Seventh Avenue,in New York City in order to take control of the building away from the union and place it in the hands of Raynor andhisallies.”

19. Case filed for The Retired Officers of the ILGWU, U.S. District Court in Manhattan. The plaintiffs include Jean Dubinsky Appleton, widow of former ILGWU Secretary Treasurer Shelley Appleton and daughter of its former president, David Dubinsky. Press release from Retired Officers E-Board member Aaron Adler: “I.L.G.W.U. RETIREES FILE SUIT AGAINST AMALGAMATED BANK AND WORKERS UNITED FOR BREACH OF FIDUCIARY DUTY,” New York, NY – October 20, 2009 –

20 The ILGWU retirees noted, “Having lost our retirement income security as a result of the selfish and unprincipled conduct of Bruce Raynor, we feel compelled to bring to public attention the anti-worker, anti-retiree policies of this self-described labor ‘leader.’ We are particularly disgusted by the crocodile tears being shed by Raynor over the alleged attempted ‘takeover’ by UNITE HERE of valuable assets and real estate which the ILGWU – not Raynor’s ACTWU – had brought to the ill-fated 1995 merger between ACTWU and ILGWU which formed UNITE….

“As longtime trade unionists, we have closely followed the internecine war which has broken out between the UNITE HERE factions. We are intimately familiar with the progressive values and traditions of the International Ladies’ Garment Workers’ Union. Our focus, historically, has always been to benefit the working class, without regard to craft or industry. A hotel worker is as much a member of the working class as a garment worker in our day. We are more concerned with the principles which guide the workers’ union rather than with the craft or industry involved…we have learned over decades with the ILGWU, that the raiding by one union of another union’s members is totally unacceptable, inimical to the working class, and destructive of the values we stand for…”

21 John Gillis, et al, Plaintiffs, v. John Wilhelm et al, Defendants, NY, NY 09 Civil. 09-1116 (GBD); and Bruce Raynor et al v. Wilhelm et al, Civil 09-1374 (GBD))

22 Ibid

23 Ibid

24 Ownership of a second, less important building was also in dispute. Recognizing the obvious, most former UNITE affiliates moved out of “275” during the War, and into another former ILGWU building, on 15th Street, owned by the New York/ New Jersey Joint Board. Soon after, short on funds, the Joint Board had to sell that building, and Workers United affiliates were forced to move a second time.

25 Asked why he had decided to vote with Pepicelli, and against Raynor and former ACTWU friends, Barao noted that “He (Warren) told the truth.” He also commented on the “respect” Pepicelli had shown by postponing the vote.

26 Keith Mestrich “Confidential Memorandum, Draft #3, (5-11-2009) to Edgar Romney, President, Workers United; cover memo to Bruce Raynor, Noel Beasley; “WorkersUnitedFinancesandNeedtoConsiderRenegotiatingShort-TermFinancialProvisionsofSEIUAffiliationAgreement”

27 Many banks were in financial difficulty in 2008. Failure to pay dividends at this time was not surprising, but that this has continued into 2013 is an indicator of special difficulties for ABNY.

28 Around this time, Bruce Raynor, now an Executive Vice President of SEIU as well as President of Workers United, faced an opt-out vote from the Workers United General Executive Board, angry that he had made unapproved payments to SEIU out of the Pooled Investment Fund. He headed off the move by issuing Bank stock to affiliates represented on the General Executive Board. The more things change…

29 Letter from Joe Hansen to Bruce Raynor and John Wilhelm, May19,2009

30 Letter of Joe Hansen to John Wilhelm, Andrew Stern and Bruce Raynor, November 30, 2009.

31 “A Labor War Ended; SEIU and UNITE HERE come to terms”, Harold Meyerson, American Prospect, July 27, 2010, web only

32 Former UNITE member health insurance is now through ALICO, and UNITE HERE’s through a different plan. The pension board includes representatives of both unions, and members of both unions are covered by the same plan.

33

34Steven Greenhouse, “For Union-Owned Bank, Lifeline Offers Chance for Growth”, New York Times, Financial ServicesApril 11, 2012

Carl Proper was a working member, then staff member of the International Ladies’ Garment Workers’ Union, then UNITE, then UNITE HERE from 1972-2011. He is now retired.Carl Proper was a working member, then staff member of the International Ladies’ Garment Workers’ Union, then UNITE, then UNITE HERE from 1972-2011. He is now retired. He blogs at CarlProper.com

One Response

  1. No one can dispute that effective union financial management is an important component to the survival and growth of unions. The process of financial decision making should not however, be relegated to a handful of union bureaucrats. The decisions of how to use resources should be put to the rank and file members through the exercise of democratic control. Thus, the financial decisions are not merely an effort to balance the books but they are a strategic tool for mobilizing the membership around union programmatic goals. Unions will not survive unless rank and file members can claim a sense of ownership over the union’s financial decisions. Members need to see that their union is more than a “vending machine” out of which they obtain better wages, benefits and working conditions. They must come to recognize the financial realities faced by their union which translate into the limits placed on union power.

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