APPENDIX K-WRITTEN TESTIMONY OF FREDERICK W. SMOLEN, CHIEF FORENSIC AUDITOR, FINANCIAL INVESTIGATIONS & SERVICES, INC Subcommittee on Oversight and Investigations U. S. House of Representatives Statement of Frederick W. Smolen, Chief Forensic Auditor March 26, 1998 The Financial Affairs of the International Brotherhood of Teamsters Mr. Chairman, distinguished members of this House Subcommittee, and guests at this To discuss the financial affairs of the International Brotherhood of Teamsters I must cover not only the Union's finances but also three key areas: "accountability," "reporting" and "oversight" and whether the organization was effective or ineffective in each of those areas. The Teamsters' union is in crisis. It is both a financial and managerial crisis. Financial crisis because the Teamster's most recent internal accounting statements show it is nearly insolvent. Its net worth, which was more than $156 million on January 1, 1992, dropped to a mere $700,000 on September 30, 1997. Managerial crisis because the General President was reelected in 1996 under a government supervised election at a cost to the taxpayers of approximately $20 million. Ron Carey is now removed amid allegations of fraud and the misuse of treasury funds related to his reelection. This has brought the Union into a leadership crisis, requiring a new election. Between 1992 and 1997, the Teamsters' net worth declined by an average of $26 million per year, an estimated $100,000 every working day. This is more than rank-and-file workers receive in a year. Think of it as a loss of $12,500 for every working hour. This horrendous loss begs answers for three questions: Where did all the money go? - Where was the oversight by the Department of Justice, the Independent Review Board and the regulators at the Department of Labor? and, - Are current Teamster officials covering up a systemic and wide ranging series of I am Frederick W. Smolen, Chief Forensic Auditor of the Subcommittee. I'm a Certified Public Accountant and serve the business, financial and legal community as an advisor, consultant and expert witness. Based on my profession's standards, in addition to what has been already learned, there appears to be fraudulent financial activities at the Teamsters between 1992 and 1997. This conclusion is because of: (1) domination, without controls, of Teamster management by a small group of individuals, (2) missing documents, (3) refusal by the IBT to provide information including financial books and records, and (4) financial analyses reflecting unexpected and significant differences. -2 |