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
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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
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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.
12 THE COURT: I see.
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.
22 THE COURT: I see.
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