Two Officials Try to Bend Union Rules

Law enforcement authorities say pension-fund officials who have little loyalty to their members are especially vulnerable to the sort of approach that Florida businessman Leonard J. Mercer Jr. used on his friend, Joseph J. Higgins.

Mercer, a Ft. Lauderdale hotel owner, told Higgins that he needed $375,000 to purchase the Ta-Boo, a Palm Beach restaurant.

Higgins had access to that much money and more. He had been retained by New Jersey Teamsters Local 701 to invest $20 million worth of union pension funds in residential and commercial loans.

But Higgins told Mercer that union rules, which were designed to protect members, restricted how Higgins’ company, Omni Funding Group Inc., could invest the Teamsters’ pension funds. In particular, no funds could be placed in high-risk ventures such as bars, restaurants and bowling alleys.

According to federal court records, Mercer then devised a scheme for Omni Funding to advance him the money under the guise that it would be used to refinance his hotel.

Omni provided the loan and submitted false reports about it to the Teamsters local, which forwarded them to the U.S. Labor Department. In return, Mercer paid $42,500 in kickbacks to Higgins in the form of cash, free hotel suites, meals and other gifts.

Reporting false information about pension-fund loans is a violation of the Employee Retirement Income Security Act, which Congress passed in 1974 to tighten up supervision over pension funds.

Acting on an insider’s tip, the Labor Department’s Office of Labor Racketeering, in conjunction with the U.S. Attorney’s office in Miami, launched a criminal investigation into Mercer and Higgins that led to guilty pleas by both men and their eventual imprisonment.

Mercer pleaded guilty to kickback charges as well as perjury for lying to a federal grand jury when he testified that Higgins had paid for his stays at Galt Ocean Mile Hotel, which Mercer owned. Identified by the Pennsylvania Crime Commission as a longtime associate of Philadelphia mob figures, Mercer received four years in prison and a $40,000 fine.

In a separate court appearance, Higgins pleaded guilty to perjury, wire fraud and mail fraud and was sentenced to eight years in prison.

Two trustees and two lawyers for the Teamsters’ New Jersey pension fund also were eventually implicated in similar corrupt dealings with Higgins. One pleaded guilty and the other three were convicted of racketeering and mail fraud.

And nothing worked out for Mercer. Before he went off to jail last spring, his hotel and restaurant went bankrupt.