Faced with the problem of corruption within organized labor, the U.S. Congress began a long series of hearings in the late 1950s aimed at finding a solution. The Select Committee on Improper Activities in the Labor or Management Field (also known as the McClellan Committee) was formed. Robert F. Kennedy, who would later become the U.S. attorney general during the presidency of his brother, John F. Kennedy, served as the Committee’s chief counsel.
The solution Congress chose was to create a financial disclosure regime for labor organizations, protections for union members and new enforcement powers for the U.S. Department of Labor. Union members were also given the right to vote for their officers, and theft of union funds became a federal crime.[*]
George Meany, the president of the American Federation of Labor and Congress of Industrial Organizations, supported the bill.
On April 14, 1959, Sen. John F. Kennedy submitted the committee report on S. 1555, the Senate version of the bill that became the LMRDA. In discussing the importance of union financial integrity, the report stated:
A union treasury should not be managed as the private property of union officers, however well intentioned, but as a fund governed by fiduciary standards appropriate to this type of organization. The members who are the real owners of the money and property of the organization are entitled to a full accounting of all transactions involving their property. (emphasis added)
The Committee is confident that union members armed with adequate information and having the benefit of secret elections ... would rid themselves of untrustworthy or corrupt officers. In addition, the exposure to public scrutiny of all vital information concerning the operation of trade unions will help deter repetition of the financial abuses disclosed by the McClellan committee.
The LMRDA and the regulations promulgated to implement it were designed to provide this “full accounting” to union members and transparency to government officials and the general public. The ultimate aim is to make labor organizations free from corruption and provide a means to remedy corruption when it occurs.
For years, unfortunately, various U.S. secretaries of labor did not take a serious interest in enforcing the LMRDA. This changed during the administration of George W. Bush, when Secretary of Labor Elaine L. Chao and Deputy Assistant Secretary Don Todd led the effort to update and revise the LMRDA’s regulations.
Before these reforms were enacted, the disclosure reports filed by unions with the DOL required little detail, and some unions reported tens of millions of dollars in expenditures on a single line.
For instance, on the old financial reports, unions reported items such as “$7,805,827 for ‘Civic Organizations,’ $3,927,968 for ‘Sundry Expenses,’ and $7,863,527 for ‘Political Education.’” Unions also reported $68,712,248 as “grants to joint projects with state and local affiliates,” $22,991,729 in “financial assistance” for local union entities, and $19,322,938 “for organizing and servicing.” The reporting of such large sums made it difficult for union members, the public and the government to uncover corruption.
This difficulty was used to full advantage by one union officer who, over a period of a few years, improperly spent over $1.5 million. The DOL noted in 2002 that the lack of detail in the then-current financial reports helped to conceal the crimes of this officer. It stated:
Although the fraudulent reporting was ultimately uncovered, the lack of supporting detail in the latter category enabled the officials to hide in excess of $1.5 million in personal dining, drinking and entertainment expenses from 1992 to 1999. This case demonstrates that detailed reporting can be an effective deterrent[.]
The ability of labor unions to report mere summary data for such massive expenditures changed when the DOL promulgated the version of the reporting regulations that are now in effect. As will be discussed in further detail below, the current regulations require detailed, itemized disclosure of disbursements in a number of functional expense categories for labor organizations with receipts of $250,000 or more. No longer can private sector unions hide millions of dollars in expenditures behind vague and overly broad categories.
[*] The bill that became the Labor-Management Reporting and Disclosure Act passed the U.S. Senate with a 95-2 vote and the U.S. House of Representatives with a 352-52 vote. These votes came after Congress held 270 days of hearings over a two-year period, calling over 1,500 witnesses to testify. Michael J. Nelson, “Slowing Union Corruption: Reforming the Landrum-Griffin Act to Better Combat Union Embezzlement,” George Mason Law Review 8, no. 3 (2000): 527; National Labor Relations Board, Legislative History of the Labor-Management Reporting and Disclosure Act of 1959, vol. 2 (Washington, D.C.: U.S. Government Publishing Office, 1985), 1453, 1738–39.