REPORT AND RECOMMENDATION BY DEPUTY TRUSTEE MICHAEL STIENS

REPORT AND RECOMMENDATION BY

DEPUTY TRUSTEE MICHAEL STIENS

CONCERNING CONTINUATION OF THE TRUSTEESHIP

IMPOSED ON COMPOSITION ROOFERS LOCAL 30

BY THE INTERNATIONAL UNION ON MARCH 21, 2003

In accordance with the Constitution and Bylaws of the United Union of Roofers, Waterproofers and Allied Workers, Bylaws Article XI, Section 4, the International Executive Board may decide to continue or discontinue any existing Trusteeship. As Deputy Trustee, I have been requested by the International President to provide a report to the International Executive Board reviewing the progress of the Trusteeship and providing a recommendation concerning whether the Trusteeship should be continued. My report shall include a review of the background relating to imposition of the Trusteeship, the major problems that were confronted by the International Union, the progress by the Local Union during the period of the Trusteeship and the remaining issues and challenges that need to be confronted before the Trusteeship should end.

Composition Roofers Local 30 was placed in Trusteeship by the International Union in March, 2003 based upon a variety of serious allegations involving gross negligence, incompetence and malpractice in the management of the Local Union’s financial affairs by its officers, possible misappropriation of funds of the Local Union, failure to administer collective bargaining agreements properly, malpractice in the administration of collective bargaining agreements, failure by the officers to perform important and critical Local Union obligations and responsibilities under the Constitution and Bylaws, misrepresentation by the officers to Local Union members concerning Local Union finances and expenses, failure to keep and maintain appropriate Union membership and other records, including records relating to the Organizing Fund and other serious infractions of our Constitution, Bylaws and possibly federal law. The details of the many factors that required imposition of the Trusteeship are set forth in a report by Bond Beebe, dated August 15, 2003, the provisions of which are incorporated herein by reference.

At this point in time, it is important to review the progress that has been made by the International Union toward resolving issues and affairs relating to the operation and administration of Local 30 and to discuss what additional actions and changes at the Local Union are required and whether continuation of the Trusteeship beyond the normal eighteen month time frame is necessary to achieve the objectives of the Trusteeship.

In the initial months of the Trusteeship, the International was faced with the daunting task of having to deal with a membership that was dispirited by reason of the financial malpractice of the prior Union officers, an Employer Association that had lost confidence in the Union’s ability to fairly and equitably enforce collective bargaining agreements in a manner that avoids favoritism among contractors, a Local Union office in which important Union and financial records were disorganized and in some cases non-existent and other problems too numerous to set forth in this memorandum that interfered with the International’s ability to resolve Local Union problems promptly.

The International initially ordered comprehensive audits of Local Union records to determine the status of the records, as well as the Local Union’s financial integrity. Similar audits and reviews of the status and operation of the Local 30 PAC Fund, Local 30 Pension Fund, Local 30 Welfare Fund, Local 30 Annuity Fund, and Local 30 Vacations Funds, and other related Local Union Funds and Union Committees also occurred. In addition, numerous meetings with RCA officers and area employers occurred (and continue to date) to repair and revive the collective bargaining relationship between the parties. The International Representatives were also required to spend substantial amounts of their time in preparation for litigation that was instituted by the suspended officers and a handful of their supporters in opposition to the efforts of the International Union to correct the problems at Local 30. And, the International was required to hire, orient and train new Local Union representatives to assist in the important business of operating the Union.

As of the present date, the International has made progress in improving the areas of Local 30’s operations as follows:

· Audits of the Local Union, the Local 30 Pension Fund, the Local 30 Welfare Fund, the Local 30 Annuity Fund and the Local 30 Vacation Fund have been completed.

· Progress has been made toward bringing the Local Union into a status of solvency in its financial affairs. Most bills are currently paid to date; however, a substantial obligation still remains by the Local Union to the International Union. Until this can be resolved, the Local Union remains technically insolvent.

· Progress has been made to repair relationships with the Roofing Contractors Association and their membership; but significantly more work needs to be done.

· A pending, potential financial collapse of the Local Union’s Health & Welfare Fund has been avoided for the near term. Substantial studies have been completed of the Fund’s financial status. A program has been adopted to return the Fund to financial health, but this program requires continual monitoring and implementation of principles adopted by the parties for at least one more year, if not longer.

· The Local 30 Pension Fund has been found to be on its financial hands and knees. A comprehensive study of the problems confronting the Local 30 Pension Fund is still ongoing; potential solutions to that problem are being studied and developed. More time will be needed in order to complete the study, adopt and implement solutions to this problem.

· More than forty-seven (47) contractors were found to be possibly delinquent to the Local Union and its Benefit Funds, on a wholesale basis. This conduct must have occurred with the complicity of former Local Union officers. An auditing program is now in progress to attack this problem and deal with these contractors. The results of this program will have an important effect on area-wide collective bargaining relationships including relationships with the RCA.

· The International has taken action to inform the members and educate them concerning the various problems that confronted Local 30. More work needs to be done during the upcoming year to work with the membership so that problems such as occurred in the past do not reoccur.

There is a great deal of work that remains in progress and needs to be completed before Local 30 and its membership should be transitioned back to their normal degree of autonomy under the Constitution. Among the things that need to be accomplished, and the reasons why the Trusteeship should not be terminated in the near term, are:

(1) As a result of occurrences and events during the administration of former officers of Local 30, Local 30 has received a Grand Jury subpoena for various records relating to Local 30’s operations, as well as the operations of the Local 30 Benefit Funds. We have been informed that the investigation by the federal authorities is ongoing as of this date and may involve potential criminality relating to ERISA fraud and other matters. The authorities have not disclosed any real specifics concerning the reach or scope of the investigation, but the records that have been subpoenaed appear to suggest that Local 30’s relationship with dozens of contractors, prior to imposition of the Trusteeship, is within the scope of the investigation. For this reason, as well as all other reasons set forth below, I will recommend that the Trusteeship continue in existence during the course of this investigation or, at the very least, until substantially more information is received from the authorities concerning its potential impact on the Union.

(2) The Local Union has not yet been completely restored to financial health. This is an ongoing process that will require more time in order to complete payment of outstanding or past liabilities and to properly re-structure the Local Union, on a financial basis, so that it is staffed properly and has a proper and manageable budget for its future operations. Reviews are in progress concerning the proper number of Business Agents, office staff, organizers, etc. that will be needed in order to conduct the Local Union’s affairs properly and the amount(s) of income that the Local Union will need in order to pay for such expenses and retain appropriate reserves,

(3) While progress has been made in repairing and improving relationships with the Roofing Contractors Association and its membership, issues of importance remain concerning the manner in which the Local Union and the RCA will relate to one another in the management and operation of Joint Labor Management Committees, the Apprenticeship Fund, the Welfare Fund, the Annuity Fund, the Pension Fund and the Vacation Fund. These discussions are in an ongoing phase and are part of the parties’ joint effort to review the operations of all Local 30 Benefit Funds, cure their various problems and establish structures for the future that will enable the parties to avoid the problems of the past.

(4) The International Union, and its representatives, may need to seek to reopen contract negotiations with the RCA in order to find solutions to numerous problems confronting the parties. Among the issues that need to be developed and discussed is a means to provide greater funding to the Local 30 Health & Welfare Fund and the Local 30 Pension Fund so that existing benefit levels can be maintained and secured for Local Union members. Addressing these problems will be part of a broader effort of finding and implementing solutions to some of the other daunting problems that still confront Local 30 and its members. For example, the administration of the Local 30 Benefit Funds is in the process of being reviewed and possibly revamped to provide greater service to members. These programs and studies are still a work in progress. Under the circumstances, the International Union, with its influence and experience, is best equipped to secure improvements in the collective bargaining agreement that may be needed.

(5) Substantial problems have been discovered during the course of the Trusteeship in relation to the administration of Local 30’s Benefit Funds. Ongoing reviews and investigations of these administrative issues are being conducted by the Board of Trustees. Since the Board of Trustees is populated by officers/representatives of Local 30 (one-half of the Board is appointed by the Union), it is essential that these reviews and investigations be completed by independent International Union representatives and not by Local Union officers who may have, in part, been responsible for the problems and poor administration in the first instance. As noted, the Board of Trustees of the Benefit Funds is presently reviewing, and expects to implement shortly, a program that will improve membership services to the Local 30 membership and their families and substantially improve the level of professionalism in the administration of these Funds. Progress in this most vital area of correcting problems of the past may be substantially impeded by removing the International Union’s influence over these decisions by premature termination of the Trusteeship.

(6) In addition to the program for curing administrative problems relating to the operation of the Local 30 Benefit Funds, the Boards of Trustees are in the process of reviewing and studying methods to financially secure, in the future, the plans of benefit provided by the Local 30 Benefit Funds, especially in relation to the Health & Welfare and Pension Funds. During the period of the Trusteeship to date, a substantial amount of time and energy was expended by the International Representatives and Management Trustees of the Local 30 Health & Welfare Fund to study and analyze the existing Plan of Benefits, re-negotiate provisions in the Fund’s contract with Blue Cross/Blue Shield and restructure the Plan of Benefits so as to assure the solvency of the Health & Welfare Fund. At the time the Trusteeship was imposed, the Health & Welfare Fund was functionally bankrupt. It had more liabilities than assets and its cash reserves had been substantially depleted and were in danger of falling to zero in the near future. A substantial effort – including an enormous commitment of work that involved days of study and meetings (the Trustees were meeting on a bi-weekly basis for many months to resolve these problems) resulted in implementation of a program, and a preliminary budget for the next year, that will improve the financial circumstances confronting the Local 30 Health & Welfare Fund and keep the benefits that will be provided to the members secure. However, this plan is scheduled for an important review in May, 2005 and additional substantial study and work may be required to assure the Fund’s solvency and continued progress in the years beyond May, 2005. A continuation of the level of cooperation, skill and dedication to solving these problems almost certainly is contingent upon continued involvement directly by the International Union in achieving a long-term cure for the problems of the past in relation to this Fund’s operation.

A similar urgency, and need for continuation of the Trusteeship, is evident in relation to the problems that were discovered, upon implementation of the Trusteeship, concerning the Local 30 Pension Fund. The Pension Fund is currently – substantially – under-funded. New professional advisers, including the auditor, Fund consultant, one lawyer, an actuary and Investment Managers were interviewed and retained to review all issues relating to the structure and operation of the Pension Fund. These studies are still ongoing and potential cures for the problem(s) are still being developed. It is expected that, following completion of the studies, a process by which solutions to cure the under-funded status of the Pension Fund may take many months for implementation. Since the structure of the Local 30 Benefit Funds – and finding solutions for the many problems in relation to their operations, funding status and benefit designs – will be dramatically and negatively affected by premature termination of the Trusteeship by the International Union, these issues, and the need to continue to find and implement solutions for the problems, require continuation of the Trusteeship.

(7) The Local Union, as well as its Benefit Funds (through the various Boards of Trustees) are currently reviewing and taking action in relation to the scores of contractors that were found to have reported zero or suspiciously few hours to the Local Union and the Benefit Funds. These studies and action programs are still in an ongoing phase. The manner in which these types of problems are handled also directly impacts the health of the relationship by and between the Local Union and the RCA. It is important, for the long-term benefit of the Local Union and its membership, that these programs be continued and that the joint cooperative action by the parties that has already been discussed and implemented (e.g., the current auditing and legal action program) be completed and achieve success before any action is taken to terminate the International Trusteeship.

(8) Substantial work still remains in terms of restructuring the Union, educating the membership on the problems created by the prior officers and establishing mechanisms that will prevent such types of misconduct from reoccurring. During the next year, it will be important to:

· Educate the membership on the responsibilities that the Local Union Officers (when new ones are elected) will have and what the responsibilities of the membership itself are in relation to those officers.

· Review and report to the membership on the financial status of the Local Union and any potential budgetary requirements that may be needed in order to properly operate the Local Union in the future.

· Educate and re-educate the membership concerning their responsibility to assist the Local Union and its properly trained officers in how to deal with employers that may be under paying the Local Union and its Benefit Funds.

· Train potential officers of the Local Union on their responsibilities under the Constitution

(9) Upon the completion of pending reviews and investigations, the International Union will need to consider charges that may be brought against former officers and other members of Local 30 for the alleged misconduct that is set forth in the Bond Beebe report. In addition, potential action to recover amounts that may be owed to Local 30 by all or some of these prior officers needs to be considered.

A premature termination of the International Union Trusteeship may result in a possible continuation of the catastrophic problems that Local 30 has experienced. Moreover, even if new elections were to be held now, the Local Union and its membership, in the opinion of the Deputy Trustee, are not yet prepared to fully comprehend all the changes that will need to be made in the Local Union’s operation, as well as the operation of the Local 30 Benefit Funds. As noted previously, the Local Union is still in the process of restoring itself to financial health, new systems and structures within the Local Union need to be put in place to assure (to the extent possible) that these types of problems do not reoccur, studies and programs are ongoing in relation to the Local 30 Health & Welfare and Pension Funds that may result in changes to the structure and operation of those Funds and important “relationship” issues remain concerning the Local Union and area contractors, not the least of which involves the forty-seven (47) or more contractors against which the Local Union and its Benefit Funds are contemplating action. Returning the prior officers to their former positions or even electing new officers at the present time will most likely interfere with and in some cases stop the progress of these ongoing and necessary studies and programs that are so essential to Local 30’s future. More time is needed to implement the “cures” for the past misconduct of the Local 30 officers.

In addition to all of these reasons, as noted previously, there is a pending federal investigation of conduct that occurred in relation to Local 30 during the prior administration. The Trusteeship should not be terminated while this matter is pending or, at the very least, until more information is received from the federal authorities in the future concerning the scope and potential impact of this investigation.

For all of the reasons set forth herein, as Deputy Trustee of Composition Roofers Union Local 30, I recommend that the International Executive Board continue the Trusteeship of Local 30 in effect for at least a 12-month period beyond its original expiration date.