Double-dipping labor leaders stand to reap millions

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At least eight Chicago labor leaders who are eligible for inflated city pensions also stand to receive union pensions covering the same work period, thanks to a charitable interpretation of state law by officials representing two city pension funds, a Tribune/WGN-TV investigation has found.

By double and even triple dipping on pensions, these union officials stand to reap millions more in retirement while thousands of rank-and-file union members face hard times and city pension funds stagger toward insolvency.

Union pension benefits are not public record, but the Tribune and WGN-TV obtained information confirming that at least seven union officials are accruing benefits in multiple pensions and another retired official already is receiving money from two pensions.

One labor leader stands to reap more than $400,000 a year from three pensions — the city laborers fund, a union district council fund and a national union fund — all covering the same time period. During his expected lifetime, he stands to receive approximately $9 million, according to an analysis based on the funds' actuarial assumptions.

Union officials are accumulating these benefits even though the state pension code includes language aimed at preventing double dipping.

Pension experts, state lawmakers and attorneys specializing in pension law say the spirit of the statute clearly prohibits labor leaders from receiving a second pension from funds established by their locals, although it does appear to contain a loophole that allows pensions from national unions.

City pension fund directors and their attorney, Fredrick Heiss, say that the law is vague and that if the Legislature had wanted to bar labor leaders from participating in union pension plans, they would have said so more clearly.

"The Legislature never told us how to administer this thing," Heiss said. "They could have said 'no second pension at all,' but they didn't say that."

What the law does say is this: Union leaders who benefit from city pensions cannot "receive credit in any pension plan established by the local labor organization based on his employment by the organization."

Heiss and other pension fund officials argue that a union district council is not a local labor organization, even though it is based in a Chicago suburb and Chicago-area locals helped create it.

Under that reading of the law, a union official would be barred from receiving two pensions for the same period only if he worked for a labor organization that had established its own pension fund for its staff. Only two union groups doing business with the city have done so. Leaders of the roughly 40 other organizations could receive union pensions because the groups pay into the district council's fund or another type of fund.

Pension experts question whether that interpretation would hold up in court, calling it illogical and narrow at best.

"I don't find their argument convincing. This is really a local pension plan because the local is paying for the pension," said Gus Fields, one of the country's leading pension attorneys, who represents numerous government pension plans.

The double dipping by union leaders exposes another problem in the state's broken pension system and rankles those trying to fix it.

"Can you name any place in the world where someone can get two pensions for the same job?" said state Rep. Tom Cross, a Republican from Oswego who has been pushing for statewide pension reform. "Even by our standards here in Illinois, it's beyond belief. It's insane."

Burr Ridge: Not local

Among those in line to reap multiple pensions with the blessing of city pension fund officials is Liberato "Al" Naimoli, president of Cement Workers Local 76.

Naimoli retired in 2010 from a $15,000-a-year city job that he hadn't worked at in a quarter-century. He now receives a city pension, based on his union salary, that pays him about $158,000 a year, more than any other annuitant in the city laborers' pension fund.

In order to get that inflated city pension, Naimoli signed an application in 2009 that stated he was not receiving credit in any local union pension plan. Yet information obtained by the Tribune and WGN-TV shows that the local has been sending pension contributions on his behalf to the union fund since 1977. He is now eligible to receive about $60,000 a year.

His second pension will come from the Laborers' Pension Fund for Chicago and Vicinity, a plan established by hundreds of private employers as well as the Construction and General Laborers District Council of Chicago and Vicinity. The council is an umbrella group composed of nearly two dozen Chicago-area unions affiliated with the Laborers' International Union of North America, or LIUNA.

Naimoli's continued participation in the union pension plan has the blessing of Heiss and of James Capasso Jr., executive director of the city laborers' pension fund. Years ago, Capasso was booted from another LIUNA affiliate for receiving contributions to the district council pension fund despite never holding a paid job with a union.

According to Heiss and Capasso's narrow reading of the law, the district council pension fund does not fall under the state statute in part because it wasn't established specifically for union employees. The fund also benefits union laborers employed by private contractors, they say.

In addition, the pension fund officials say that because the district council is located in Burr Ridge, a suburb about 20 miles southwest of Chicago, it doesn't qualify as a "local labor organization." And they note that some unions that make up the council are not based within the city.

"We go through a painstaking process to follow the law," Capasso said during an interview with the Tribune and WGN-TV. "We take pride in it."

Terrance Stefanski, executive director of the city pension fund for municipal employees, said his fund interprets the law the same way — a policy he said was in place before he became executive director in 2000.

Pension fund experts say such a reading of the statute disregards the intent of the state law.

"Someone who is determined to agree with them might be willing to buy that line of reasoning," said Fields, a former attorney with the Internal Revenue Service who helped the agency implement federal pension laws before moving into private practice in Texas. "But if the local is paying for the pension, it seems to me that it would be kind of hard to argue that he's not getting a pension established by the local labor unit."

"I think the interpretation is implausible and illogical, and I think it guts the underlying legislative intent that there be no double dipping," said Laurie Reynolds, a professor of law at the University of Illinois at Urbana-Champaign. "I don't think it's a good-faith interpretation of the law."

Capasso acknowledged that he did not examine the union pension fund's founding documents or the district council's constitution and incorporation papers before approving Naimoli's city pension.

"We have no reason to do that because (the district council) is not a local labor organization," Capasso said.

The laborers district council was founded by 20 affiliates, including Naimoli's Local 76 and two other locals that represent city workers. Its purpose is to consolidate the power and resources of the region's locals into a single entity. It is run by delegates from the local unions; Naimoli was a council board member for more than a decade.

The council's constitution gives the organization the right to establish "employee benefit plans for personnel and officers of the District Council and its affiliated Local Unions." The locals send money from union dues into the fund for their employees' pensions.

In addition to his inflated city pension and his pension from the district council's fund, Naimoli stands to receive a third from the national union, LIUNA, thanks to the loophole in state law that appears to bar double dipping only for locally established pensions.

Under the LIUNA constitution, union dues from the locals also must go into a national union pension plan that benefits local officers and staff.

It's a generous plan. When he turns 60 next year, Naimoli will become eligible to receive about 87 percent of the average of his three highest years of pay, which would work out to about $220,000 a year, according to formulas contained in LIUNA's pension plan documents.

In all, Naimoli is eligible to collect about $450,000 a year from the three pensions after he retires from the union, according to an analysis of the plans' actuarial assumptions. He stands to receive about $9 million during his lifetime.

Naimoli did not return phone messages requesting an interview, and LIUNA officials declined to comment for this story.

Oversight questioned

At least three current and former union officials who are in line to reap multiple pensions are trustees of the city laborers' pension fund, raising questions about oversight of public pension funds established to safeguard the retirements of city workers.

Trustees have a legal obligation to protect the funds' interests and place them above personal gain. But the boards are composed entirely of union officials and city officers, meaning there is no one to object if those parties cut deals that benefit union or city leaders but hurt the funds.

The board of the city laborers' pension fund consists of four current or former union members and three city officials.

The Civic Federation, a nonprofit policy think tank, has long recommended that the boards of city pension funds include taxpayer representatives and experts in pension governance and financial investment. It has also pushed to have one board oversee all of the funds.

"There's a clear need among the pension funds to have trustees who are singularly focused on the core function of the funds, which is to marshal and protect the city pensions' assets so they'll be available for retirees," said Laurence Msall, president of the federation. "We have long advocated (for) independent citizens with expertise in finance and investing represented on the board. So far we have not been successful."

Charles LoVerde III, a former trustee of the city laborers' pension fund, stands to benefit directly from the fund's decision to allow double dipping. He is one in a long line of LoVerdes who have held union leadership positions at Local 1092, another Chicago affiliate of LIUNA and the laborers' district council.

LoVerde last worked for the city in 1998, when he took a leave of absence from a $44,000-a-year job with the city Water Management Department to work full time for the local. At the time he was already vice president of the union and a longtime board member of the district council.

LoVerde applied to remain in the city laborers' pension fund as permitted by law and stands to land a sizable city pension based on his union salaries. He earned $275,000 last year as secretary-treasurer for the district council and roughly $20,000 from Local 1092.

To get the inflated city pension, he had to certify he wasn't participating in a local union pension fund. But information obtained by the Tribune and WGN-TV shows that in September, LoVerde became eligible to receive about $4,000 a month from the laborers' district council pension fund, having accrued pension contributions since 1982.

As an officer of the council and a LIUNA local affiliate, LoVerde also will be eligible to land a big pension from the national union — making three pensions for the same time period. Together, they will add up to nearly $500,000 a year.

The average city worker will get just one pension worth about $29,000 a year.

Two other trustees on the board of the city laborers' pension fund stand to receive union pensions in addition to inflated city pensions: William Irving, president and secretary-treasurer of Local 1001, and Nicole Hayes, Local 1001's recording secretary.

LoVerde, Irving and Hayes did not return messages requesting comment.

Pension shift attempt

A handful of union officials have been prevented from accessing these additional pensions, but that doesn't mean they didn't try.

Last month, the Tribune and WGN-TV reported that four members of the International Brotherhood of Electrical Workers Local 134 violated state law by receiving contributions toward a union pension while reaping six-figure city pensions for the same period of work.

Among them were Thomas Villanova, now president of the Chicago and Cook County Building and Construction Trades Council, and Tim Foley, then the business manager at the helm of Local 134. All four signed applications with the municipal workers' pension fund stating that they were not participating in a local union pension plan.

That turned out to be untrue — even under the charitable interpretation of state law championed by city pension fund officials.

All four were receiving contributions in a Chicago-based pension plan that Local 134 set up to benefit only its own employees. Villanova's union pension contributions alone were worth at least $200,000.

When city pension fund officials discovered last year that the labor leaders had been violating the law, the union officials said they had made an honest mistake. After signing affidavits promising to "disclaim" the benefits they had accrued from the local, the labor leaders were allowed to stay in the city fund.

However, their attorney, Edward Hogan, later attempted to shift about $300,000 in union dues to a different pension plan set up for Local 134 members who work in the private sector.

The request was eventually withdrawn amid strong protests from rank-and-file union members and reports by the Tribune and WGN-TV. Foley resigned his leadership position last week, citing media reports.

WGN-TV producer Marsha Bartel and reporter Mark Suppelsa contributed.

jgrotto@tribune.com

Copyright © 2014, Los Angeles Times
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