6.28.11 U.S. v. D.C. Conference Transcript

8/6/2019 6.28.11 U.S. v. D.C. Conference Transcript

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1 UNITED STATES DISTRICT COURT

1 SOUTHERN DISTRICT OF NEW YORK

2 ------------------------------x

2

3 UNITED STATES OF AMERICA,

4

4 Plaintiff,

5

5 v. 90 Civ. 5722 (RMB)

6

6 DISTRICT COUNCIL OF NEW YORK

7 CITY and VICINITY OF THE

7 UNITED BROTHERHOOD OF

8 CARPENTERS and JOINERS OF

8 AMERICA, et al.,

9

9 Defendants.

10 ------------------------------x

11 New York, N.Y.11 June 28, 2011

12 2:30 p.m.

12

13 Before:

14

15 HON. RICHARD M. BERMAN,

15

16 District Judge

16

17 APPEARANCES

17

18

18 PREET BHARARA

19 United States Attorney for the

19 Southern District of New York

20 Attorney for Plaintiff

20 BY: BENJAMIN TORRANCE

21 Assistant United States Attorney

21

22 WEISS & WEISS LLC

22 Attorneys for Michael Bilello

23 BY: SCOTT A. WEISS

24

25

SOUTHERN DISTRICT REPORTERS, P.C.

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1 APPEARANCES CONTINUED

2 FITZMAURICE & WALSH, LLP

2 BY: DENNIS WALSH

3 Review Officer

3 - and -

4 MINTZ LEVIN

4 Attorneys for Review Officer

5 BY: BRIDGET ROHDE

5

6 LATHAM & WATKINS

6 Attorneys for UBC

7 KENNETH CONBOY

7 WILLIAM RECHLER

8 NATANIEL KALE

8

9 DeCARLO, CONNOR & SHANLEY, PC

9 Attorneys for District council

10 BRIAN F. QUINN

1011 McELROY, DEUTSCH, MULVANEY & CARPENTER, LLP

11 Attorneys for Intervenor

12 General Contractors Association

12 BY: MARK A. ROSEN

13

13 CARY KANE, LLP

14 Attorneys for Carpenters Committee for

14 Democracy and Workers Rights

15 BY: LARRY CARY

15 ANDREW M. KATZ

16

16 RAYMOND McGUIRE

17 ELIZABETH O'LEARY

17 Attorney for Trustees of the Benefit Funds

18

18 BISCEGLIE & DeMARCO, LLC

19 Attorney for John Holt

19 BY: ANGELO R. BISCEGLIE, JR.

20 MARK I. SILBERBLATT

20

21 THE SEGAL COMPANY

21 BY: JOHN URBANK

22

23

24

25

SOUTHERN DISTRICT REPORTERS, P.C.(212) 805-0300


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1 like to start with that. I am happy to hear from lawyers, but

2 as I've indicated to you, I'm also very interested in hearing

3 from financial people. I understand there is someone here from

4 the Segal Company; that would be Mr. Urbank. So I would be

5 happy to hear from you directly on this topic, if you will.

6 I don't know, Mr. Walsh, if you want to kick off this

7 subject.

8 MR. WALSH: Judge, I have had the opportunity to speak

9 in advance of the conference with John Urbank. I could think

10 of no one better to address the Court's concerns than

11 Mr. Urbank, who is an expert and who works closely with the

12 trustees of the benefit funds. And if I could suggest that

13 Mr. Urbank be allowed to give the Court and everyone gathered

14 today an introduction sort of a summary, and then he will make

15 himself available to answer specific questions that the Court

16 may have about the condition of the various funds.

17 THE COURT: OK. Mr. Urbank, you are welcome to do

18 that from the podium, if you prefer. That might be the most

19 convenient place.20 MR. URBANK: Your Honor, I'll start off with the

21 Pension Fund.

22 THE COURT: You might just tell us, Mr. Urbank, the

23 relationship of your company to the funds. You are a

24 consultant actuary.

25 MR. URBANK: Segal Company is the consultant and


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1 actuary to the Pension and Welfare Fund. We have been so since

2 2000. I myself am the benefit consultant, and we also have the

3 role of actuary and health benefit analyst.

4 THE COURT: Are you principally accounting financial

5 background people or --

6 MR. URBANK: Financial people, enrolled actuaries,

7 underwriters, etc.

8 THE COURT: OK. Thanks.

9 MR. URBANK: OK. On the Pension Fund, we're obviously

10 required to do annual valuations of the Fund, the last one

11 being done was July 1, 2010. That is the Fund's fiscal year.

12 Based upon the requirements of the Pension Protection

13 Act, the Fund's funded status was 81.9 percent. The Fund took

14 advantage of the pension relief provision that is looking at

15 the losses for -- investment losses, that is, for 2009 and '10.

16 We're to amortize those using the asset valuation method over

17 10 years and the 29-year amortization under the funding

18 standard account. Those were permitted by the Act.

19 As I said, the Fund status is neither endangered nor20 seriously endangered nor in critical status. Therefore, it is

21 in the green zone based on the funded status.

22 We have done projections for the Fund, taking into

23 consideration the current employment levels, and the Fund is

24 projected to continue to be in the green zone for at least ten

25 years.


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1 THE COURT: And how about the size of it?

2 MR. URBANK: Pardon me?

3 THE COURT: What is the size of the Fund?

4 MR. URBANK: In excess of $2 billion in assets.

5 THE COURT: OK.

6 MR. URBANK: OK. On the Welfare Fund, annually we

7 provide the trustees with our financial experience and budget

8 projection report. It's a tool for the trustee to evaluate the

9 current financial status and future status. It shows both

10 historical results as well as projected results.

11 The basis of the projections are assumptions that we

12 work with with the trustees. And the more recent ones that we

13 have done, the assumption for man-hours, was based on 16

14 million. That was to reflect the decline of employment in the

15 industry.

16 In terms of expenses, we basically used those that

17 occurred in the past and used normal underwriting requirements

18 to project those expenses. The projections show that based

19 upon the assumption of 16 million man-hours and the current20 contribution rate of $11.25, that the income would not be

21 sufficient in the projection period primarily because of the

22 benefit expenses do reflect inflationary trends ranging from

23 3 percent up to 10 percent, based upon the different benefit

24 levels; particularly the higher percentages are for

25 hospitalization and medical expenses and prescription drug


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1 expenses. As a result of those projections, there are deficits

2 projected in the current fiscal year and in future fiscal

3 years, which will result in a decline in the assets of the

4 Fund.

5 Again, we reflect no increase in the contribution

6 income. So you have increasing expenses and a flat level of

7 income, and, primarily, it is a tool that allows the trustee to

8 review it and take any action, if necessary.

9 In the past, the hours of the Fund have been in excess

10 of 20 million hours before, and clearly that would result in a

11 better outcome for the Fund.

12 THE COURT: You say now it is 16?

13 MR. URBANK: For the fiscal year ended 2010, I believe

14 it was 16.7 million, and on that basis we used 16 million going

15 forward. Obviously, we rely upon the trustees' advice, as they

16 know the issue better than our firm.

17 THE COURT: And what is the size of this Fund?

18 MR. URBANK: The net assets of the Fund are about 225

19 million. That would include reserves for incurred nonreported20 claims. Without those, it is roughly $180 million.

21 THE COURT: And you referenced that the Pension Fund

22 is in the green zone, as it were. Where is this Fund? Is this

23 Fund in more difficulty, or what?

24 MR. URBANK: No. Under the requirements of the

25 Pension Protection Act, there are basically three zones --


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1 endangered, seriously endangered, and critical. If you are in

2 none of those, you are considered in the green zone, which

3 basically means that your funded status is above 80 percent and

4 you do not have a projected funding deficiency.

5 THE COURT: Where is the Welfare Fund?

6 MR. URBANK: The Welfare Fund does not have similar

7 funding requirements.

8 THE COURT: So I'm trying to figure out health wise or

9 viability wise where the Welfare Fund stands.

10 MR. URBANK: The Welfare Fund has approximately -- the

11 last report to the trustees indicated the Welfare Fund had

12 reserves of approximately 11 to 12 months.

13 THE COURT: In practical terms, what does that mean?

14 At the end of that time period, it has no money?

15 MR. URBANK: That's basically looking at the assets of

16 the Fund relating to the next -- following years' projected

17 expenses if there was no income coming into the Fund.

18 Obviously, there is income coming into the Fund. With

19 no action either by increasing contribution hours or increasing20 the contribution rate or, conversely, some modification perhaps

21 to control expenses over a longer term period, perhaps two to

22 three years, the Fund's assets would decline.

23 THE COURT: OK. Is that it?

24 MR. URBANK: That's it.

25 THE COURT: OK. So could we talk a little bit more


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1 about the Welfare Fund. I think there has been some discussion

2 at some of our conferences, or hearings, that the Welfare

3 Fund -- tell us a little bit more about the Welfare Fund, what

4 it pays for, so to speak, and what its viability is and what is

5 projected.

6 MR. URBANK: The Welfare Fund provides a very rich

7 benefit program of hospital, medical, prescription drug, dental

8 optical, disability, life insurance for active members and

9 their dependents. In addition, it provides similar benefits

10 for retirees who meet the eligibility requirements, beginning

11 at age 55, and extends throughout. There is benefits for

12 surviving spouses. So it is a full range of benefits.

13 THE COURT: And what is the significance of the fact

14 that there is reserves at this point of 11 to 12 months?

15 MR. URBANK: Each year we measure the Fund's reserves

16 to give the trustees a sense of what the future funding

17 requirements are. Based on our experience in this economy,

18 reserves of a year are favorable.

19 THE COURT: So that is a good thing?20 MR. URBANK: Yes, sir.

21 THE COURT: And what, if anything, is proposed to

22 happen with this Fund to make sure that it remains viable in

23 light of some of these factors which are less favorable --

24 economics, for example?

25 MR. URBANK: Well, if the economic recovery would


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1 work, with increased hours, that would definitely be a benefit.

2 Through collective bargaining, the contribution rate could be

3 adjusted.

4 On the other side, expenses can be controlled by

5 various changes to the benefit structure, either by increasing

6 the cost sharing with the participant or changing some funding

7 arrangements with the vendors.

8 Unusually in these types of circumstances, we find

9 that it is a multi-faceted approach to address this situation.

10 THE COURT: And is there discussion about that now,

11 and how --

12 MR. URBANK: Yes. Throughout my tenure with the

13 board, we have continually had discussions on what can be done.

14 Recently, we have proposed, based on their request,

15 various plan modifications that could made under the individual

16 benefits, such as the hospitalization and medical, the

17 prescription drug. We've reviewed some funding arrangements

18 with the vendors. So a series of alternatives and

19 modifications have been presented and discussed with the board.20 THE COURT: And what is your assessment of the Fund?

21 I think you mentioned just a minute ago, you think -- I'm

22 trying to figure out where it stands vis-a-vis maybe other

23 funds of similar purpose and, you know, in other parts of the

24 country.

25 MR. URBANK: I think, depending upon the economy, if


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1 work does not rebound to provide more contribution hours to the

2 Fund or other income is not provided to the Fund, then benefit

3 changes would probably be required, or some modification in

4 size to reduce the projected outbreak in deficit.

5 Additionally, the Fund retains investment consultants who

6 invest Fund assets in various equities and fixed income

7 instruments that provide income to the Fund. We, on a company

8 policy, do not produce in our projections the expected

9 investment gains or losses. We only use as an income source

10 dividends and interest.

11 I can tell you that recently, based on information

12 provided by the Fund office, through April the Fund has

13 experienced some investment gains which would modify the

14 deficit. However, being at the end of June and changes have

15 occurred, I don't have an update on that.

16 THE COURT: So what is the deficit that we are looking

17 at right now?

18 MR. URBANK: The deficit projected for this year was,

19 I believe, $44 million.20 THE COURT: And that would be through July.

21 MR. URBANK: That would be projected through June 30,

22 2011.

23 As I said, that does not reflect any unrealized or

24 realized gains on investment, which to date I don't know the

25 exact number, but as of April it was in the $30 million range.


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1 THE COURT: The gains were?

2 MR. URBANK: The gain, yes, sir.

3 THE COURT: Fair enough.

4 MR. URBANK: That was projected through the end of the

5 year, what that gain might be.

6 THE COURT: So do you net the gain in this instance

7 from the projected deficit?

8 MR. URBANK: It is ultimately realized at the end of

9 the fiscal year. That would reduce the operating deficit.

10 THE COURT: To $10 million dollars if those --

11 MR. URBANK: If those numbers were reached, yes.

12 THE COURT: Are those numbers ballpark numbers, in

13 your opinion?

14 MR. URBANK: Through December, the numbers in terms of

15 the actual result, the cash flow result to the Fund, we're

16 tracking close to our projections. I think through April the

17 investment return was greater than what it was at the end of

18 December.

19 THE COURT: And what does it mean to be in deficit20 status with a fund like that? I mean, how do you make up the

21 deficit, as it were? Let's say that --

22 MR. URBANK: If in any particular year as a result of

23 expenses exceeding your income from normal contributions and

24 investment return, a deficit is incurred, it reduces your net

25 assets. It is an ongoing concern. So the following year the


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1 only way to make up the deficit would be if your income is

2 increased to offset the projected expenses for that year and

3 you had an operating surplus, and then you get back to balance.

4 THE COURT: But if you don't have a surplus?

5 MR. URBANK: The deficit is reduced to net assets.

6 THE COURT: It is a deduction from the net assets?

7 MR. URBANK: You reduce it from net assets, yes.

8 THE COURT: So from the 225 million, or whatever?

9 MR. URBANK: Correct.

10 THE COURT: I see. Could you tell us a little bit

11 about the investment of both the Welfare Fund and of the

12 Pension Fund, starting with the Welfare Fund?

13 MR. URBANK: I'm not an investment consultant. They

14 retained an investment consulting firm, who then hires

15 investment managers to place their assets. Segal has no

16 involvement with that.

17 THE COURT: I see. And so what is Segal's, so to

18 speak, current -- I want to use the word "advice" but it is not

19 really advice. What is your -- if you took a snapshot of the20 Welfare Fund at this point in time, how would you assess its

21 prospects?

22 MR. URBANK: As I said, without a rebound in

23 contribution hours --

24 THE COURT: Meaning the economy?

25 MR. URBANK: The economy.


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1 -- with more contribution hours or higher contribution

2 rate on the income side, then to balance the Fund, expenses,

3 some modifications, or a combination of both would be needed to

4 adjust for the deficits and to sustain the long-term viability

5 of the Fund.

6 THE COURT: And in making that assessment, does your

7 company, or where do you turn for an assessment of where things

8 are going in 2011, 2012, in the economy, for example? You must

9 at this point be looking forward, because you are almost

10 finished with the fiscal year.

11 MR. URBANK: We look forward -- we primarily, as I

12 said earlier, the contribution requirements, we rely upon the

13 trustees' advice to let us know what they believe the

14 contribution income may be, how the work of the Fund might be

15 going forward.

16 On the expense side, which is really the part where

17 we're looking forward as to what we expect, we use national

18 trends to determine what the expectation is for future benefit

19 costs. Obviously, those are -- we do a national survey, our20 organization. Additionally, we looked at what the funds'

21 actual experience is year over year, what the change in

22 demographics might be to determine -- and, again, past

23 historical costs -- to determine what is expected going

24 forward. But we tend to be somewhat conservative and we look

25 at what industry trends are, and in this day and age,


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1 inflationary trends for medical benefits are in the 9 to

2 10 percent range.

3 THE COURT: I take it, you probably look at also a

4 regional picture as well?

5 MR. URBANK: We do. For a group of this size, we tend

6 to look at the Fund's own experience as well as what is -- you

7 know, their type of contracts, whether they use preferred

8 provider networks and the discounts that are then inherent in

9 determining what the cost might be to the Fund.

10 THE COURT: If you could return for a minute to the

11 Pension Fund.

12 How are the economics of the Pension Fund, how is that

13 funded, as it were, as compared to the Welfare Fund? It must

14 be different.

15 MR. URBANK: The Pension Fund also is obviously funded

16 by a contribution rate and the contribution work hours.

17 Additionally, a large component of funding the pension plan is

18 based upon investment return. For funding purposes, we use a

19 7-and-a-half percent investment return assumption.20 The Fund's typically -- the Fund's investment

21 philosophy for the Pension Fund is different than a Welfare

22 Fund, where on the pension side they have more investment in

23 equities, which can generate better returns, depending on the

24 market, obviously. We utilize the standard actuarial methods,

25 and it is a long-term funding that we use for projections.


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1 THE COURT: And if you could tell us just for a moment

2 how are each fund, that is to say, the Pension Fund and the

3 Welfare Fund, doing in 2011 as compared to how they have done

4 historically, if that is something you can respond to?

5 MR. URBANK: The Pension Fund is, as I said earlier,

6 evaluated annually. So changes that occur during the year we

7 don't really annualize, because it's based upon pension credits

8 earned during the course of a plan year, and that's not

9 determined until the end of the year.

10 The only thing that is reported -- and not by us, by

11 the investment consultants -- how the investments are running

12 for the Fund on a fiscal year-to-date basis, based on the last

13 report that I heard, the investment return has been favorable.

14 THE COURT: That's with respect to --

15 MR. URBANK: To the Pension Fund and, as well, to the

16 Welfare Fund because as I said earlier, the Welfare Fund is

17 experiencing investment gain this year.

18 THE COURT: And the last question that I have about

19 each of the funds, and you touched on this already: We had20 some discussion here about threats, so to speak, to the

21 viability of these funds. What do you see in that regard? Is

22 that too dramatic a term to apply, or is it --

23 MR. URBANK: I think the projections to the Pension

24 Fund are favorable, as I said earlier. We've -- based on the

25 current assumptions, if they are reached, which takes into


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1 account the demographics, the investment return, contribution

2 income based upon a change in the contribution base, that the

3 Fund is projected to be in the green zone for several years.

4 If those assumptions are met, that's what we would expect. So

5 we think the Fund is in excellent shape.

6 The Welfare Fund, the projections are not as long as

7 they would be for a pension fund. A reserve of one year for

8 the size of this Fund is acceptable; it could be better.

9 Again, we're faced with the downturn in employment that

10 probably has the most impact on the Fund.

11 THE COURT: And the rising health costs?

12 MR. URBANK: And the rising health costs, and those,

13 obviously, could be addressed through modifications to the plan

14 if the board so decided.

15 THE COURT: So that covers the issues I had.

16 Did anybody want to comment on those two?

17 MR. WALSH: Your Honor, I wonder if I could suggest

18 that Mr. Urbank summarize for us all the information that the

19 beneficiaries receive automatically from the Funds and the20 other information that they are entitled to receive if it is

21 requested by them.

22 MR. URBANK: The Fund -- the Pension Fund, annually

23 the Fund distributes an annual funding notice which replaces

24 the summary annual report. That's provided 120 days after the

25 beginning of the plan year.


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1 THE COURT: So when was the last such notice?

2 MR. URBANK: That would have been mailed last

3 September, and that is a new requirement with the Pension

4 Protection Act.

5 THE COURT: That is an actual mailing to one's

6 address?

7 MR. URBANK: Yes.

8 THE COURT: And Mr. Walsh raises a good point. What

9 is in that notice, so to speak?

10 MR. URBANK: It indicates the funded percentages of

11 the Fund. It tells us what their assets are over the last

12 several years. It indicates what zone the Fund is in, whether

13 it is in the critical zone or an endangered zone. As I said,

14 this Fund is in neither. It also indicates what the minimum

15 pension benefits would be under the Pension Benefit Guarantee

16 Corporation.

17 When a new participant comes into a plan, whether

18 Pension or Welfare, they are provided a summary plan

19 description, which provides all the benefit information.20 If changes occur during the course of the year, they

21 are provided a summary of material modifications.

22 They have access to, upon request, to the Form 5500

23 for both funds.

24 THE COURT: Meaning?

25 MR. URBANK: It's a document that is provided through


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1 the Department of Labor, the government. They can request that

2 as well as the pension valuation, and the Fund's financial

3 statements.

4 THE COURT: So is the same true for the Welfare Fund?

5 MR. URBANK: For the Welfare Fund, rather than an

6 annual funding notice, they receive a semi-annual report which

7 gives them basic information on the assets of the Fund and the

8 income and disbursements. They also receive a summary plan

9 description, summary of modifications when changes occur, and,

10 again, they also have access to request the Form 5500.

11 THE COURT: So, typically, the summary plan

12 description is a document that is provided at the beginning of

13 one's employment, right?

14 MR. URBANK: At the beginning of one's employment,

15 and, typically, with changes, they are republished every five

16 years to give the participants the most current benefit levels.

17 Any changes that occur in the interim, a summary of material

18 modifications are provided that effectively wind up in the

19 summary plan description.20 THE COURT: And in both instances, these documents --

21 the annual notifications are mailed to the plan participants?

22 MR. URBANK: Yes.

23 THE COURT: And is there a possibility, or is there a

24 provision already that these plans could be online somewhere,

25 on Mr. Walsh's website, or something like that, or not, or are


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1 they on the District Council's website?

2 MR. URBANK: They are on free ERISA. They have access

3 to that information. There may have been discussions to put

4 some of the other information on the website but I don't know

5 that for sure.

6 THE COURT: OK. So, now, if somebody needed

7 additional information, what would they do? They would make a

8 phone call or --

9 MR. URBANK: They could contact the Fund office. The

10 Executive Director of the benefit funds is normally on all

11 mailings. They give the telephone number, the address. They

12 could contact him either by phone or by mail.

13 THE COURT: Who is that person, if you know?

14 MR. URBANK: Currently, it is Stuart GraBois.

15 THE COURT: How do you spell that?

16 MR. URBANK: G-R-A capital B-O-I-S?

17 THE COURT: And he is where?

18 MR. URBANK: He is at the Fund offices at the

19 Carpenters' building.20 THE COURT: Which is?

21 MR. URBANK: 395 Hudson Street.

22 THE COURT: Great.

23 Did that answer your question, Mr. Walsh?

24 MR. WALSH: Yes, your Honor.

25 THE COURT: Anybody else?


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1 MR. McGUIRE: Your Honor, Raymond McGuire,

2 representing the Carpenters Funds.

3 I think Mr. Urbank has given a comprehensive portrayal

4 of where the funds are and what their status is. I would like

5 to, however, supplement his remarks with the concerns that have

6 been expressed to me and to other professionals about the

7 situation with the Welfare Fund.

8 THE COURT: OK. So we're just at the halfway mark.

9 If you want to just take a minute or two to express those

10 concerns?

11 MR. McGUIRE: Very briefly, your Honor.

12 THE COURT: We could double back later, but this would

13 be a good time. Yes.

14 MR. McGUIRE: OK. Historically, the Fund has used an

15 18 million man-hour mark as the likely number of hours worked,

16 multiplied by the contribution rate, gives you your income. At

17 the 18 million man-hours, the Fund was always running a

18 deficit. But historically, over the last ten years, there have

19 been 20 million hours worked, almost 24 million in 2008. We20 are down now not just to 16 million hours, we're projecting 15

21 million hours in the coming year.

22 The trustees, as John said, are people who are

23 actively involved in the industry -- general contractors,

24 construction managers, specialty contractors, all dealing with

25 the carpenter trades, as well as the carpenter officers


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1 themselves. We all have a feel for where the industry is

2 going, and we don't feel well about it.

3 We're losing market share, as we speak. If we don't

4 do something about becoming more competitive and increasing our

5 revenues and becoming more realistic about the Plan and

6 reducing expenses, in 2013 we will have exhausted our reserves.

7 So that's what we're looking at and that is what we're

8 grappling with.

9 Thank you, your Honor.

10 THE COURT: I don't quite get that. In 2013, you

11 would have exhausted your reserves? We have reserves right now

12 extending 11 or 12 months, right?

13 MR. McGUIRE: That's right. If we had no additional

14 income coming in other than what we have through the $11.25 an

15 hour, if we have 15 million hours and --

16 THE COURT: In what year?

17 MR. McGUIRE: In '11/'12 and 2012 and 13, we will have

18 exhausted our reserves. That's what we are concerned about,

19 and that's what we are trying to come up with solutions to.20 And the solutions involve the district --

21 THE COURT: You know what, that's very helpful. So we

22 are at the half hour mark. Let's stop this for now and move to

23 the next topic, and solutions is a good topic to come back to

24 later.

25 MR. McGUIRE: Sure.


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1 THE COURT: Great. Thanks very much. That was very

2 helpful.

3 MR. URBANK: Thank you, your Honor.

4 THE COURT: So, the bylaws. Status of revisions to

5 the bylaws, Mr. Walsh, is that something that you can help us

6 with?

7 MR. WALSH: Judge, as we contemplated at the last

8 conference, there was a comment period of 30 days, and I

9 received approximately 60 detailed written comments from

10 members as well as correspondence from counsel.

11 THE COURT: During the comment period?

12 MR. WALSH: During the comment period.

13 And as we contemplated, I then met with counsel for

14 the UBC. We met last week and had a further discussion. They

15 were, by the way, provided with the comments so they had the

16 benefit of the insight of the members.

17 I can characterize the discussion as, again, helpful.

18 It certainly moved the process forward. I will say this, that

19 the Stipulation and Order contemplates that certain amendments20 occur at a very low level, that the bylaws be amended to

21 comport with the Stipulation and Order. That has been meant;

22 there is no question about that.

23 The process that we have been involved in is,

24 collaborative, to try to do better than that, to try to craft

25 bylaws which will serve the District Council in a post-election


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1 era, that will shore up the infrastructure of the union. And

2 we have made progress in that regard.

3 We will likely have another draft produced shortly.

4 And at some point we may collectively decide that the union

5 thinks they've proffered a good document. I may agree. I may

6 think that there is a bit more that can be done, where I might

7 use my recommendation authority under the Stipulation and Order

8 to formally recommend that the union consider certain

9 improvements, which they can accept or reject, as contemplated

10 by the order. And at that point I would have the option then,

11 if I felt it appropriate, to file a motion and put it before

12 the Court as to whether that improvement should be made.

13 I'll certainly defer to counsel for the UBC if you

14 want to add to that at this time.

15 THE COURT: Before we do, we should say a couple of

16 things here. Some people -- I know you have and I know I have

17 in chambers -- have gotten some requests to extend the comment

18 period. I think you thought, and I think appropriately so,

19 that we should move the process along and so that there was no20 basis for that, and since so many people had commented within

21 the formal comment period, that it was appropriate to just keep

22 going. Is that right?

23 MR. WALSH: Yes. And we actually got to the point in

24 reviewing the comments that we had received that there was a

25 certain redundancy in the hot-button issues, for lack of a


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1 better phrase. And I think we have received the very great

2 benefit of insight from members who obviously spent a lot of

3 time parsing through these proposed bylaws, as well as the

4 contributions from counsel who weighed in. So I think it is

5 probably diminishing returns.

6 I also held a town-hall type meeting last week, which

7 I called an hour forum. And in the notice I put out, I

8 specifically invited members to come and comment on the bylaws

9 as well as the restructuring proposed by the UBC. And that was

10 attended by about 200 members, and we also put in the notice

11 that the meeting would be recorded. And that should it please

12 the Court, I would make that recording available to the Court

13 and to the parties, if it was requested, and I have audio

14 recordings of that event.

15 So there has been in that event an additional

16 opportunity for a great many members to speak, some in some

17 detail, about their feelings on both of those subjects.

18 THE COURT: And, Mr. Walsh, could you tell us about

19 how people were able to obtain a copy of the bylaws or the20 draft that was being considered? Were they made available

21 online or --

22 MR. WALSH: Yes. The comment version was posted on

23 the District Council website, and I assume there were

24 additional private websites. I know for a fact there was one

25 popular private website where it was also posted. So I think


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1 there was a fairly good but cost-efficient distribution for

2 those who chose to inquire.

3 THE COURT: Mr. Conboy, did you want to speak?

4 MR. CONBOY: Judge, I just wanted to express the

5 appreciation of the UBC to Mr. Walsh.

6 These discussions have been very constructive that we

7 have had. We have had a large number of comments from a whole

8 variety of sources. I think they have been given an exhaustive

9 and fair review by Mr. Walsh and by our team. And it is my

10 hope and expectation that it will not be necessary for

11 Mr. Walsh to go into a process of making formal additional

12 recommendations. I can't say that flatly because we still have

13 a relatively modest number of matters to work through. But I

14 do think that the bylaws, in terms of reforms and changes, are

15 very substantially improved now, and that in the relatively

16 small number of additional issues that we were working through

17 with Mr. Walsh, I am optimistic that we can resolve those quite

18 quickly.

19 THE COURT: Very good. What is your expectation,20 approximate, of a timeframe for further discussions, another

21 draft, or the like?

22 MR. WALSH: Well, with respect to the draft, I know

23 that Latham Watkins is working diligently, as they always do,

24 to turn the document around, and I would leave it to Mr. Conboy

25 to inform the Court.


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1 MR. CONBOY: No more than ten days, Judge.

2 THE COURT: To reflect what's been agreed to and

3 discussed so far?

4 MR. CONBOY: Yes, and hopefully conclude the dialogue

5 with the officer.

6 THE COURT: Is it that document, the document that

7 will be produced in ten days, that will be -- will it

8 incorporate all your -- not all your points, but your concerns,

9 or will it be that document that is subject to further

10 discussion between you and the Council?

11 MR. WALSH: Certainly, the union reserved the right to

12 say we've gone as far as we think we can go. They are in some

13 respects constrained by a lot of bylaws that they use in all

14 the jurisdictions nationwide.

15 They do recognize the uniqueness, however, of the

16 situation in New York, and they have made an attempt to address

17 the unique problems reflected by the corruption in New York.

18 And they need to shore up the bylaws in a unique way.

19 But I think we are getting to the point where, if20 necessary, we can agree to disagree, both sides understanding

21 why the other side has taken a particular position.

22 THE COURT: So that's pretty good, Mr. Conboy.

23 In terms of the timeframe, I would imagine, in the

24 next, I don't know, couple of weeks or so you would probably be

25 where you are heading?


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1 MR. CONBOY: Yes.

2 THE COURT: Right?

3 MR. CONBOY: Absolutely, Judge.

4 THE COURT: What is your goal about an end day, so to

5 speak, for the bylaws? Let's assume two things. First, no

6 motion practice, let's assume that you and the officer conclude

7 something that you both agree to; when might that happen?

8 MR. CONBOY: Well, I would expect at that point, your

9 Honor -- I don't want to speak for Mr. Walsh, but I would think

10 that under the procedures that are set out in the Stipulation

11 and Order, that Mr. Walsh would hopefully be in a position to

12 say that here is a set of revised and reformed bylaws that the

13 UBC and the Review Officer have reached full agreement on and

14 we now submit them to your Honor, and presumably at that point

15 there will be a question as to whether or not your Honor was

16 prepared to approve them.

17 Dennis, am I accurate in terms of the sequencing that

18 you have in mind?

19 MR. WALSH: Well, I think some of that is going to be20 left to faith. If there is an agreement, then from my

21 perspective the paragraph 5.b process will have been concluded

22 without the need for litigation or consideration by the Court.

23 That obviously doesn't constrain anyone else from involving

24 themselves or trying to involve the Court.

25 But I think it's fair to say that in the next 30 days


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1 we will have a very solid view as to where they are, and we'll

2 certainly be clear enough for people who either agree or

3 disagree as to the actual document.

4 I can also say that we are making progress -- and we

5 will get to this on the writing of the election rules -- and I

6 think everyone needs to be mindful that when we actually do

7 install delegates and a new executive board in January, that

8 there is a provision for further amendments of the bylaws, and

9 the bylaws obviously need to be regarded as a baseline, that

10 the people who govern the District Council will be able to make

11 their own motions about how business is conducted, more in the

12 nature of regulations than legislation.

13 So people should remember there is that opportunity

14 for democracy to implement changes at the pleasure of the rank

15 and file members come January.

16 THE COURT: Good. All right. Thanks very much.

17 So the next topic I wanted to learn a little about is

18 the restructuring. Who would take the lead on that?

19 MR. WALSH: Well, just as a matter of procedure, which20 I know everyone is interested in, although the union did write

21 a letter and send a letter to the Court, it was copied to the

22 government and to me. And from my perspective, I view my

23 obligation in this regard as a paragraph 5.b review function.

24 And I am undertaking that review right now.

25 THE COURT: I see.


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1 MR. WALSH: I am endeavoring to get answers to certain

2 questions from the union. I have not encountered difficulty in

3 getting answers to the questions.

4 There was one immediate observation that I reported on

5 in my second report about the obvious impact of man-hours for

6 work performed by members of Local 1456 and Local 2287 and the

7 Local 740, if their geographic jurisdictions were paired back.

8 And I have posed those questions to the union, and I'm starting

9 to get information as to how that would actually work so that

10 it would not have a draconian, an immediate impact on the

11 funds.

12 We actually calculated the man-hours that would be at

13 risk, and it's conservatively estimated, based on data that we

14 got from the fund, of between 850,000 and a million man-hours

15 per year if the geography of those three locals were just cut

16 and those man-hours were not paid into the Fund. However,

17 there is a process that has been described to me and referred

18 to as reciprocal agreements, whereby if members of those unions

19 continued to work in the geographic jurisdiction, those20 man-hours, those fringe benefit contributions would go back to

21 the New York Fund at the rate of the Local collective

22 bargaining agreement in question, which I understand would be

23 less, whether it is New Jersey or in Suffolk or up county.

24 So that was I think a bright line issue that struck

25 everybody's eye, and we are working through that trying to


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1 understand what the immediate and long-term impact on the

2 benefit funds would be.

3 THE COURT: So just so it's clear, you are now

4 discussing or raising the topic of if there were a change in

5 the geography of a local, for example, and in fact if it were

6 limited to the five boroughs of New York, as opposed to

7 exceeding that, that could, and the material suggests, have an

8 impact on the viability or certainly the size and well-being of

9 the various funds?

10 MR. WALSH: It would -- I will give you an

11 illustration, Judge.

12 THE COURT: Yes.

13 MR. WALSH: Local 1456, based on the numbers we saw,

14 conducts approximately 36 percent of its work outside the five

15 boroughs, and that's over 600,000 man-hours. So that if there

16 was not some reciprocal arrangement with the jurisdiction or a

17 phase-in, there would be an immediate impact over the course of

18 12 months that would be appreciable; it would be significant.

19 THE COURT: Got it. So that's something that, as a20 preliminary matter, you and Mr. Conboy are discussing?

21 MR. WALSH: And with the UBC supervisor and his people

22 at the union.

23 I will say that we have, as the Court has, received

24 correspondence from a number of parties. There are many

25 members who are very upset, and they were given an opportunity


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1 to actually state the reasons for their feelings about the

2 restructuring at the forum last week. And I am mindful of the

3 emotional ties that members have to their long membership in

4 these locals.

5 I am also mindful, however, that this was done in

6 1997, and that there was a challenge to a restructuring, which

7 is very similar in scope, back in 1997, and that as part of

8 this case Judge Haight accepted the finding of the

9 investigation and Review Officer. There was no issue created

10 under the Consent Decree that the challenges, based on

11 purported violations of the Decree, were rejected by the

12 District Court.

13 THE COURT: But it raises a good point. So maybe just

14 for the record you could briefly identify what is the purpose

15 of the restructuring? What is the restructuring seeking to

16 accomplish?

17 You mentioned one of the members are concerned, and

18 rightly so, of the negative consequences that could ensue. But

19 why do it in the first place?20 MR. WALSH: Well, there was a report prepared by one

21 of the representatives who reports to the General President,

22 Mr. McCarron, who cited economist of scale in combining the

23 administrative functions of similarly-situated local unions as

24 a cost-saving mechanism. I've also been told, anecdotally,

25 that there has been problems in policing some of the


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1 jurisdictions in New Jersey and in other counties by sending

2 agents from the New York City base and that work has been lost

3 as a result of that.

4 The UBC has also cited the historical inequity of

5 having the New York City District Council's jurisdiction extend

6 into areas like New Jersey, and under the UBC Constitution the

7 General President is vested with authority to apply a national,

8 or big picture, lens to, in his discretion, act in the best

9 interest of the membership as a model.

10 The theories have been tested, as I mentioned, back in

11 1997 here in New York.

12 THE COURT: Sure. Mr. Conboy, anything you want to

13 add to that?

14 MR. CONBOY: Yes, Judge. I did want to say that the

15 reference that Mr. Walsh made to the portion of the submission

16 that we made to you is an analysis by Philip Newkirk, and that,

17 of course, is available for your Honor to review.

18 But I do want to say that the contributions on a very

19 focused basis, particularly with respect to the dock builders20 issue, have been very helpful. The comment period just ended I

21 believe yesterday or today, and I note, for example, that

22 Mr. Bisceglie has filed a careful and extensive critique of

23 certain portions of the restructuring plan. And I do expect,

24 your Honor, that in consultation with Mr. Walsh, we will be

25 reviewing all of the comments, and, obviously, that influences


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1 Mr. Bisceglie's letter, and others, and we will remain

2 open-minded with respect to the various concerns being

3 expressed.

4 This is, we certainly concede, an issue of very big

5 moment for a number of many, many rank and file members. So my

6 hope is that -- and I'm not entirely comfortable about giving

7 your Honor a number of days, but as soon as we can give a

8 comprehensive review of everything that's been said in the way

9 of comment, Dennis and I and our teams would be working to

10 narrow the focus of outstanding issues so that we can address

11 them more definitively perhaps on the adjourned date that your

12 Honor selects.

13 THE COURT: And not unlike the process you are using

14 with the bylaws?

15 MR. CONBOY: Right.

16 THE COURT: A similar collaborative process?

17 MR. CONBOY: Right.

18 I do want to just mention, Mr. Walsh was, of course,

19 appropriately advising your Honor in terms of Judge Haight's20 decision. That matter was appealed to the Second Circuit. And

21 the Second Circuit decision is -- let me not get into an

22 argument about the impact of it, but there is, I think, a

23 particular relevance of the Second Circuit's analytical

24 approach to this.

25 THE COURT: Good.


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1 MR. CONBOY: Thank you, Judge.

2 THE COURT: Thank you.

3 I was going to ask you, Mr. Walsh -- I think maybe

4 Judge Conboy has touched on it -- without pinning you down,

5 what kind of timeframe do you perceive for this? I think it is

6 somewhat longer than what's required to come up with the

7 bylaws.

8 MR. WALSH: Well, I can say, I think reasonably

9 confidently, that I can finish my review, provided all my

10 questions are answered, within the next 30 days. But I am just

11 as subject to the efforts of persons, whether they be private

12 members or local unions, who may choose to challenge the

13 restructuring.

14 THE COURT: Sure.

15 MR. WALSH: But from my own perspective, I think I

16 will get the answer and be able to wrap up the 5.b review

17 within the next 30 days.

18 (Pause)

19 THE COURT: So we move to negotiations with Wall and20 Ceiling and what implications that might have for all of this.

21 MR. CONBOY: Judge, obviously, this is a matter of

22 some delicacy in light of the fact that the contracts expire on

23 Thursday at midnight. But I do want to advise your Honor that

24 on the 15th of June there was a very constructive meeting at

25 Mr. Torrance's office with the Review Officer and with Douglas


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1 McCarron, the General President, and Frank Spencer, the

2 Trustee.

3 Judge, we had a very constructive discussion with the

4 government and with the Review Officer particularly with

5 respect to giving a written proposal in connection with the

6 broader and most critical issue, that is, the tension between

7 the full mobility objectives of the employers as a trade-off

8 for elimination of the 50/50 rule. In the course --

9 THE COURT: Maybe you could just explain that a little

10 bit more broader, what the issue is there.

11 MR. CONBOY: Yes. The principal question, Judge, with

12 respect to these negotiations are whether the constraints

13 imposed by the Consent Decree, and particularly Judge Haight's

14 order, with respect to free access to selection of members of

15 the union for particular projects -- as you know, approximately

16 one-third of those positions must be filled through an at work

17 list. The employers have become increasingly concerned about

18 the anticompetitive nature of that 50/50 rule. And, in fact,

19 the reserve officer has commented in his report to the Court20 with respect to some broad and noted concerns --

21 I won't characterize it beyond that.

22 THE COURT: Sure.

23 MR. CONBOY: -- that are fairly widespread not only in

24 terms of his office but the industry on a growth basis.

25 The hope is that a creation of a labor management


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1 committee or corporation, as anticipated in Section 10(b) of

2 Judge Haight's Stipulation and Order, with the sufficient

3 involvement going forward of all of the concerned parties, that

4 that might be successfully negotiated in the collective

5 bargaining talks that address a contract to expire on Thursday.

6 In the course of our meeting with Mr. Torrance and

7 Mr. Walsh, we were asked for a written proposal, and we did

8 indeed deliver that written proposal. And as a consequence of

9 that subject, we have been in dialogue since then with respect

10 to what might or might not be appropriately communicated to the

11 employers during the course of these next critical days.


13 MR. CONBOY: So we were in contact with the United

14 States Attorney and the Review Officer this morning in terms of

15 some refinement with respect to the understanding of the U.S.

16 attorney and the Review Officer.

17 Obviously, Judge, they are not parties to or

18 participants in the collective bargaining agreements, and we

19 are mindful of our obligations in the course of this, because20 it is so critical. Everybody recognizes this is a critical

21 factor, if not the most deciding factor, that will affect

22 all -- that may affect all of the other terms of the contract

23 as it emerges.

24 So that, Judge, is about the maximum that I am

25 comfortable in stating publicly with respect to the matter.


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1 But these negotiations are fully engaged and quite

2 intense, and the obvious hope is that an agreement can be

3 reached before the expiration of negotiations on Thursday.

4 THE COURT: And even if they weren't, I don't suppose

5 the world would come to an end, because typically there would

6 probably be an extension, or is the goal to actually have a new

7 agreement by Thursday?

8 MR. CONBOY: Well, I certainly can confirm, Judge,

9 that the goal is in fact to have an agreement with Wall and

10 Ceiling and with the other principal contractors, or the

11 associations that represent the principal contractors, and

12 then, as you know, there is a sequential process following that

13 that hopefully would effectively replicate what's agreed to in

14 the talks that are ongoing now.

15 THE COURT: Got you.

16 Mr. Torrance, did you want to state anything?

17 (Pause)

18 And on my agenda, the election is the last topic. How

19 is that shaping up and timeframes and how, if at all, is that20 impacted by any of these other topics that we have been talking

21 about? Perhaps not at all.

22 MR. WALSH: Judge, I am very much dedicated to the

23 proposition that we hold an election by December 15th; that

24 preceding that local unions will elect delegates according to

25 an appropriate ratio of representation in October, or no later


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1 than October, and that the EST, the executive

2 secretary-treasurer, the president, the vice president elected

3 directly by the members of the affiliated local unions be

4 installed in January. And I believe that that objective can be

5 achieved regardless of whatever ancillary litigation may or may

6 not occur with respect to any other issue, whether it be

7 restructuring or an outgrowth of that.

8 We are making progress on finishing the draft rules

9 for the election, and I am optimistic that we will be able to

10 promulgate them in the latter part of July.

11 And if we set, for instance, December 15th as our end

12 date for the election, using the 120-day calculation

13 contemplated in the election section of the Stipulation and

14 Order, that would have set promulgation for August 15th. We

15 can do better than that, knock wood.

16 And I have also decided that the way to enfranchise

17 the greatest number of carpenters is to have an all mail-in

18 ballot, that there would be no direct in-person voting. We

19 successfully ran a mail-in ballot component that enfranchised20 many members back in 1995. It was run by the so-called Triple

21 A, the American Arbitration Association, who has a stellar

22 reputation in this regard. It would be my plan to contact them

23 and see if we can work out a contract for their involvement

24 this time as well.

25 And during the comment period that would follow, the


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1 recent District Council elections have also used a mail-in

2 component. And I think it's -- it is the best way to

3 enfranchise the eligible members, considering that there are

4 many, many thousands of members who live well outside the

5 metropolitan area, and they will be able to consider the issues

6 based on the mailings that they will get, based on the union

7 newspaper and whatever individual candidate literature is sent

8 to them, and then send their ballots in, after having made an

9 informed decision.

10 THE COURT: Got it. Did you want to respond.

11 MR. CONBOY: Judge, I just want to reaffirm the

12 commitment to the UBC to the election schedule that Mr. Walsh

13 announced actually many, many months ago, which leads us to

14 believe that it is entirely viable and realistic and we are

15 behind it.

16 THE COURT: OK. Why wouldn't it be an achievable

17 goal?

18 MR. CONBOY: We are --

19 THE COURT: That was sort of a rhetorical question.20 MR. CARY: Your Honor, Larry Cary, for the Carpenters

21 Committee.

22 While we share the desire to move to an election,

23 there is a lot of moving parts right now which the Court knows,

24 obviously, as we've gone through the day. We're concerned

25 about the restructuring and what does it mean. I mean, do


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1 people get elected as delegates, the local get dissolved,

2 transferred? How does that impact on the landscape? There are

3 some pieces to this which have to be in place. There is some

4 potential litigation which may come as a result of that.

5 We're not interested in delaying it, but to stipulate

6 to the date in the face of these questions is I think a bit

7 much.

8 THE COURT: Well, yes --

9 MR. CARY: Aspirationally, we would love to have it

10 wrapped up by December 15th.

11 THE COURT: It seems to me -- and you all know these

12 issues much better than I do, but some of these issues are

13 going to remain a little bit amorphous, but, nevertheless, one

14 could move and have an election, in any event. I mean, it is

15 not entirely clear to me that everything is going to be

16 entirely wrapped up and that the election has to wait for that

17 to happen.

18 MR. CARY: I would agree with the Court's expression.

19 THE COURT: But it is a fair point that you make;20 there are a lot of moving parts.

21 MR. WALSH: Judge, just to respond to Mr. Cary, we are

22 in essence in that theory deferring to a phantom, something

23 that has not happened. And I have not as a matter of record

24 heard anybody in this courtroom say that there is a reason why,

25 as the record exists now, this election cannot be scheduled by


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1 and procedures for the conduct of elections no later than 120

2 days before the first election during my tenure.

3 And in the absence of a stipulation, there is no court

4 order that actually sets that date. So I think by strict

5 construction there would be no necessity or requirement,

6 indeed, for me to promulgate these election rules, or perhaps

7 even authority, without either a court order or a stipulation

8 of the people who are party to the Stipulation and Order.

9 THE COURT: Anybody else want to be heard on that?

10 (Pause)

11 MR. WEISS: I think I do. Scott Weiss, on behalf of

12 Mr. Bilello, since Mr. Bilello put this ball in motion way back

13 in January 25th.

14 THE COURT: He did.

15 MR. WEISS: Certainly we have been working towards the

16 idea of having an election by December 15th. My only question

17 is -- and maybe we are just arguing with a phantom -- what the

18 timing would be as we go forward in addition to the 120 days,

19 because there is a comment period, there is a give-and-take as20 to the 5.b period? Mr. Walsh has commented on the record here

21 that he sees no reason that this election cannot happen in

22 December.

23 So barring litigation, or what the landscape would be,

24 as Mr. Cary points out, I would be curious if Mr. Walsh and

25 Mr. Conboy are confident that all the facets of the


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1 restructuring plan will be in place, and we would know what

2 that landscape is so that the constituencies who are voting in

3 that election know which locals they are in and who they are

4 voting for.

5 THE COURT: Sure. Mr. Walsh, do you want to comment?

6 MR. WALSH: Judge, I would say that from the moment I

7 give notice that I have completed the 5.b review, that the UBC

8 would be at liberty to implement the restructuring in the

9 absence of a litigation and a stay issued by the District

10 Court.

11 MR. WEISS: That is the answer.

12 THE COURT: I think that is the answer.

13 Mr. Conboy, did you want to comment?

14 MR. CONBOY: No. I am in complete agreement with Mr.

15 Walsh.

16 THE COURT: Yes, sir.

17 MR. CARY: It is a question as to my status, your

18 Honor. If I heard correctly --

19 THE COURT: You are in the green zone.20 MR. CARY: I wish I was, which is very good.

21 I thought we were -- and perhaps I'm wrong, but I

22 thought we had intervened into this motion, and, as such, I

23 would expect that we are a party. We are not a party to the

24 Consent Decree, obviously, just as Mr. Bilello is not a party

25 to the Consent Decree, but he did make a motion; he is a party


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1 to that motion. And if his agreement is necessary for a

2 stipulation, I seen see no reason why our agreement is not

3 necessary.

4 THE COURT: I need to take a look at that as a legal

5 matter.

6 Anybody have a thought?

7 MR. WALSH: Well, Judge, I don't see how it is

8 possible that, with all due respect, that movants on the

9 election question, that is a timing question.

10 THE COURT: Right. Right.

11 MR. WALSH: But they cannot band together to assume

12 the role of a party to the Stipulation and Order, who actually

13 agreed to this express language in the Order.

14 THE COURT: Right. So your view, then, is that the

15 date, for example, is set by stipulation between or among whom?

16 Yourself and --

17 MR. WALSH: The relevant parties, excluding the

18 benefit funds, since they have no scope in this regard. So

19 that would be the District Council of Carpenters and the20 government.

21 THE COURT: Right. And all of whom are in accord that

22 December 15th is the date, right?

23 MR. TORRANCE: That is correct, your Honor.

24 MR. CONBOY: Yes. And, Judge, obviously, the UBC

25 through the trustee.


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1 THE COURT: Sure. OK. I agree with that, actually.

2 But I will still take a look at what has been submitted so I

3 can see if it is --

4 MR. CARY: I appreciate the Court's concern.

5 THE COURT: You bet.

6 MR. CARY: Thank you.

7 THE COURT: You bet.

8 So I think that as far as I am concerned, we are right

9 on the money in terms of time.

10 Anybody else on these five topics? I know we want to

11 come back to Mr. McGuire for a minute or two.

12 (Pause)

13 No?

14 Mr. McGuire, so you wanted to -- and I think rightly

15 so, talk a little bit more about viability issues, and I'm

16 happy to have you do that. And I would also, in that context,

17 like to hear, if there are viability questions, what are

18 viability proposals or solutions.

19 MR. McGUIRE: Raymond McGuire, for the Carpenters20 Funds.

21 I think perhaps it's been noted in this court that

22 we've had 30 collective bargaining agreements expire this year.

23 Most of them will expire on June 30, 2011. We have had some

24 that have had successfully -- where successful replacement

25 agreements have been negotiated, most notably between Master


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1 Painters and District Council of Painters No. 9. And the

2 industry -- and by that I mean the employer's side of the

3 industry -- regards this as a watershed year.

4 We've watched our market share erode steadily over the

5 last 20 years. We probably now have less than 50 percent of

6 market share in all five boroughs. We're doing better in

7 Manhattan.

8 We have lost virtually all residential work in the

9 boroughs, where a lot of residential work is going on. And

10 we've all addressed this in our collective bargaining

11 negotiations. Every single association has said to its

12 collective bargaining partner, we have to reduce labor costs by

13 20 percent if we're going to survive as a unionized industry in

14 this city.

15 And, for example, today the highrise contract just

16 completed negotiations with Mason Tenders District Council

17 Local 79. Agreed to a wage freeze -- wage benefit freeze in

18 the first year of the agreement, 2 percent and 2 percent in the

19 second and third year, a change in the apprenticeship20 journeyman mix, which will reduce our labor costs by

21 10 percent, and a change in hiring home referral rules, which

22 will achieve another 5 percent in productivity gains. This

23 kind of discussion is going on with every trade. The high-rise

24 contractors are negotiating with Locals 14 and 15 of the

25 Operating Engineers. The Operating Engineers don't seem to


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1 have the same sense of urgency, and right now virtually

2 everybody is predicting a strike on Friday by the Operating

3 Engineers.

4 But the painters have agreed to a 20 percent reduction

5 in their wage and benefit rates for all residential work in the

6 boroughs. They have agreed to a freeze for 18 months on wages

7 and fringe benefit contributions.

8 And the Carpenters are involved in these exact same

9 negotiations with primarily Wall and Ceiling. They are hearing

10 from the Carpenters that they have to get their labor rates

11 down, they have to get the cost of fringe benefits down. We

12 cannot afford an $86 package going forward unless we get better

13 productivity and more certainty in the identity of the

14 workforce.

15 So we're confident that if we both work at this, if

16 the contractors will go after that nonunion worker -- they've

17 pledged themselves to do it -- if the unions will recognize

18 that we have to wring out every ounce of fat from the

19 agreements, that the 15 million hours projected by the20 Carpenters will be 16 million next year and 17, and in three,

21 four years we will be back to 20 million hours. If we're not,

22 we're just in trouble. We're in trouble with pension funds,

23 although that is a much longer term issue, where every fringe

24 benefit fund in New York City is grappling with this issue of

25 10 percent increases in medical costs, the employers want a


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1 freeze.

2 Where do you get the money? Do you modify the

3 benefits? Do you redirect money from the Pension and the

4 Annuity into the Welfare Plan? And these are exactly the kinds

5 of issues that the trustees are grappling with. And we're

6 spending hours and hours and hours on this subject.

7 And we know what our fiduciary obligation is. It's to

8 the beneficiaries, the people that are retired. It's to the

9 people that are participating. But, you know, it's also to the

10 generations that have not yet arrived, that we want to keep

11 this wonderful industry alive and viable, and we're struggling

12 to do it and we'll figure out a way.

13 THE COURT: Great. Thank you.

14 So that really exhausts the agenda that I had. Unless

15 anybody else wants to comment?

16 We usually at this point open up the discussion. We

17 have some time left. If people in the audience want to address

18 any of these issues at the podium, they can do that.

19 (Pause)20 I should say before we do that, I think that the

21 presentations were excellent and at least from my point of view

22 exceedingly helpful. I thank everybody for your participation.

23 Yes, sir.

24 MR. LEBO: Your Honor, my name is Bill Lebo, L-E-B-O,

25 Local 45. I actually prepared a statement, but there were some


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1 things that were brought up today that I -- that kind of threw

2 me for a loop.

3 Mr. Urbank was talking about our funds, and it got to

4 the point when it was going to be a $10 million deficit. You

5 picked that up.

6 THE COURT: I don't think he is making that flat

7 assertion. But he had some numbers that he used, and if you

8 did the math it could be 10 million. But I don't think you

9 could say --

10 MR. LEBO: There or abouts. If everything went as

11 he -- they assumed it was going to, you would end up with

12 approximately a $10 million --

13 THE COURT: You could.

14 MR. LEBO: I was sitting down thinking, all we would

15 have to do, really, is increase a dollar benefit to that fund

16 and you would have $60 million -- you would have a $6 million

17 overdraft. So we are not talking about how the situation --

18 the last time we were here, when I was listening to the tale

19 about the welfare benefits, I thought the thing was about to20 collapse and that's not -- that just is not the case.

21 There are ways of doing it without hurting. We are

22 talking about decreasing the benefits to pensioners, dental,

23 optical, doing -- you know. To hurt the pensioners is absurd.

24 And this is some of the things that from what I've understood

25 have been talked about.


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1 Now, these are guys with set incomes. They have fixed

2 incomes, and they are drawing a pension. And now they are

3 going to hit them with, well, now you are going to have to pay

4 for your own dental work? One of the reasons we've worked so

5 hard for a living all these years and break our backs and risk

6 our lives every day when we go out to work is because when we

7 retire, we want to be able to retire with our medical benefits

8 intact. We don't expect, you know, decreases in the economy

9 and so forth but they do happen. But then guys like us that

10 are working today for a living would be more than happy to make

11 sure that those pensioners don't lose that.

12 So this should be discussed about these negotiations.

13 We should be looking at cutting the benefits rather than maybe

14 increasing, take -- we have a Fund. We have assessments that

15 were taken out of our paychecks every week that, in my opinion,

16 were done illegally. They were assessed by the past governors

17 of the Council, ESTs, and the delegate body to the point of a

18 60-cent an hour assessment, where the membership had to have

19 voted on it. And the way I read the law, the membership should20 have had a vote on their dues and assessments by the

21 ratification of the membership under the LMRDA. It wasn't done

22 that way; so be it.

23 And from what I understand from Mr. Walsh, 50 cents an

24 hour out of that money is going to the organizing department,

25 which now has --


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1 THE COURT: Is going to?

2 MR. LEBO: The organizing department, which from what

3 I understand now has a $20 million bank account or a $21

4 million bank account of monies that they are not using.

5 So there are ways of going around things and maybe

6 taking some of that money back and putting them into that fund

7 to bolster that fund without hurting the membership.

8 That's just one point.

9 THE COURT: All right. We've got other people lined

10 up.

11 MR. LEBO: OK. I'll go through the rest of this

12 quicker, then.

13 On the contract issue, since the UBC is worded well, I

14 ask this Court to extend the -- well, you are going to end up

15 having to extend the contract. I don't think -- I just don't

16 see it happening at the end of, you know, the 30th -- by the

17 30th. There is a lot of language in the UBC restructuring plan

18 and bylaw draft that violates the LMRDA and the LMRA. I think

19 the U.S. Attorney's Office and the RO should vet this language.20 There is just clear illegal language in it, and I really think

21 before anything is okayed that should be removed. I had

22 written letters to Mr. Walsh, and I believe -- you know, I hope

23 that comes to pass.

24 On the untimely elections, the problem that may come

25 to pass is that there may be litigations to stop the mergers in


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1 going to do anything for the good of this union.

2 Mr. McCarron has -- they are talking about a loss in

3 market share. When Mr. McCarron took over almost 20 years ago,

4 there was 750,000 members in the UBC. Today there is 350,000.

5 Our market share has been steadily decreasing because his

6 organizing tactics have not worked. He has not done anything

7 constructive in this union that I can tell, and I don't think

8 there is guy here who will tell you that he has.

9 And I just can't see that this guy is out here telling

10 you that, you know, we have to do this and we have to do that

11 with the welfare benefits, and we're going to negotiate the

12 best we can. No, they're not. They're going to give the

13 contractors whatever they want.

14 Mr. McGuire is talking like he's paying us. He's not

15 paying us. We work our butts off for a living. And, quite

16 frankly, I don't trust him.

17 THE COURT: All right. So let's hear the next

18 speaker.

19 If you could state your name for the court reporter20 MR. FRANCO: Good afternoon, your Honor. My name Dan

21 Franco, F-r-a-n-c-o.

22 Now, I'm not opposed to the December 15th elections,

23 but I do have a problem with the membership being left out of

24 being informed. That is the reason why I started my petition

25 that I delivered to you on June 10th, that I have over 400


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1 signatures, and I have more that I haven't submitted.

2 What I have a problem with is that the membership is

3 often or almost always left out of all actions, and the bigger

4 the action, the more likely that the membership is going to be

5 left out.

6 I would like to have the District Council provide

7 notification to all the members that we have a new set of

8 bylaws, a proposed set of bylaws that is going to be put upon

9 them, because when I was getting signatures for my petition,

10 the majority of those members that signed did not even know

11 that the bylaws and the restructuring, by the time I was

12 getting some of the signatures, they were online. Most members

13 don't go to the District Council website because it is not

14 often updated. It has been updated quite a bit lately, and

15 that's only because of Mr. Walsh. If it wasn't for Mr. Walsh,

16 that website would still be useless.

17 Now, that was really --

18 THE COURT: So you are saying the drafts were and are

19 available on the website?20 MR. FRANCO: They are available on the website, but

21 the majority of the members do not go to the website.


23 MR. FRANCO: It was nice that we were given -- the

24 people that are looking for it, waiting for it, asking for

25 these documents, the people that are paying attention at this


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1 level -- that we got to know of it and we knew to look to the

2 website.

3 THE COURT: Right.

4 MR. FRANCO: Because we are often conversant with our

5 representatives and with Mr. Walsh, but the majority of members

6 it not even know that it existed. And I find that to be a

7 problem with most information that is provided by the Council,

8 and most information is not provided to the membership,

9 especially documents such as this.

10 That includes the restructuring program. Now, the

11 restructuring program I have a huge problem with, even more so

12 than the bylaws. I find contradictions in this that are very

13 problematic. And the most problematic to me is where it states

14 that there is going to be no change to Local 157. Yes, there

15 is going to be a newly charted Interior Systems Local, which is

16 going to absorb members. Nowhere else does it say that members

17 are going to be transferred out of, except for if you read the

18 paragraphs, it says members will be transferred into the newly

19 charted local.20 At our last Local meeting, Paul Capurso told us

21 that --

22 THE COURT: You might want to spell that for the court

23 reporter.

24 MR. FRANCO: Capurso?

25 THE COURT: Yes.


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1 MR. FRANCO: C-a-p-u-r-s-o; I hope I've got it right.

2 He told us that the transfer, the 608 members into 157

3 was temporary. I asked him who told him that. He told us

4 Spencer told him that.

5 So they had to -- the UBC had to have known that they

6 were going to put the Local 608 members somewhere, because they

7 had said early on that it was temporary. So I figured that

8 they already have the Interior Systems Local a pen stroke away

9 from being chartered and they will transfer members into it,

10 yet it doesn't say that any members are going to be transferred

11 out of any locals.

12 So this is part of the doubletalk that the UBC keeps

13 doing over and over and over again. They keep saying they are

14 working for us. They keep saying that they are trying to do

15 the right thing.

16 Just like Bill was saying, the membership has dropped.

17 I think, in the '70s, it was like 750,000, like bill said. I

18 don't know what it was in the '80s. But as it stands today, in

19 2010, if I remember correctly, it is down to 443,000 members.20 One of the reasons is that in 1999, the British

21 Columbian Canadian carpenters got so fed up with McCarron's

22 tyrannical control of them where he told them that they weren't

23 allowed to vote on certain things, they eventually

24 disaffiliated.

25 That's going on now in Jersey. He has consolidated


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1 over 69 -- I think it is 69 local unions in the Northwest and

2 New York State, New Jersey. He has removed hundreds of elected

3 officials, officers, and has replaced them with newly chartered

4 locals with appointed E boards. Everything UBC does they do

5 against the membership.

6 They talk about Phil Newkirk expresses one of the

7 reasons for the restructuring; it is economies of scale. Now,

8 if economies of scale trump our democracy, then we don't need

9 economies of scale; we need our democracy. We want, and need,

10 to elect our representatives to represent us, and not have this

11 economies of scale, or whatever reason that they give, which I

12 think is more doubletalk, put upon us as an excuse to take away

13 our property, our democracy, our local unions that we built,

14 that they are not his, they are ours. He is supposed to

15 represent us, and he doesn't.

16 And I see a long campaign -- even before McCarron got

17 into office as General President, he has had a campaign of

18 removing the rights of members and has transferred their

19 property to him. The UBC Constitution, if you read through20 it --

21 THE COURT: I don't understand your point.

22 MR. FRANCO: I'm sorry.

23 THE COURT: I don't know what you mean by has

24 transferred their property to him. I don't know what that

25 means.


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1 MR. FRANCO: Our local unions, he has dissolved them,

2 merged them upon his whim. Our property, our Local unions, our

3 buildings, our bank accounts --

4 THE COURT: I see.

5 MR. FRANCO: -- everything, the offic

Documents

6.28.11 U.S. v. D.C. Conference Transcript