union as a democratic institution for the rank and file. We will see today that irregularities in IBT finances did not begin with the 1996 election. Rather, certain Teamster officials became alarmed as early as 1993 that the IBT treasury was in steep decline and that Carey refused to take the necessary steps to fix it. We will get beneath the surface of the facts that I've mentioned and I think gain a much deeper understanding of life inside the IBT, from the time Ron Carey was first elected in 1991 until the illegal activities that led to the 1996 election being overturned and Mr. Carey being barred from running again for office. From the testimony of four veteran Teamster's officials this morning, we will see how promises to the union's rank and file were broken and their trust violated by Ron Carey and his top lieutenants. These witnesses held senior positions in the union hierarchy with important fiduciary and other responsibilities. Yet when they suspected wrongdoing and asked questions and sought documents in the spring of 1993, they were stonewalled, kicked out of meetings where they had previously been included, and retaliated against for trying to do their duty. Today they will be heard as they describe their futile attempts to get information and the retaliation they endured for trying to protect the rank and file. I admire their perseverance and I look forward to hearing their testimony. We will also hear this morning from Mr. Fred Smolen, an experienced forensic auditor hired by this subcommittee, who will lay out for us the shocking decline in this union's financial health. Mr. Smolen will show us a pattern of financial improprieties fraud in dishonesty, of ineffective government oversight, and of irregularities in accounting, and illegal acts by Ron Carey's IBT. I want to stress that, in the end, our investigation is not only about financial wrongdoing or Ron Carey personally. The true issue is democracy and whether the Federal Government has kept faith with the Teamsters rank and file and moved the IBT closer to being a free, fair, and democratic union whose leaders are accountable, not to the Federal Government, but to their own membership. The news is not encouraging based on the testimony we will be hearing this morning. As a result of this and other work that we have done, I know that this subcommittee has to devote further hearings to the role played by the independent review board, the Labor Department, the Justice Department, and the Federal election officers in overseeing the Teamsters in recent years. Today's testimony will help this subcommittee understand what tools may be needed by union members to better hold their leaders accountable, to assure themselves that their assets are being managed wisely, and that the interest of the rank and file are first on the union's agenda. WRITTEN STATEMENT OF THE HON. PETE HOEKSTRA, CONGRESSMAN I understand the chairman of the full committee is joining us, Mr. Goodling. Chairman Goodling. I'm on my way over the floor. Of course, we have some interesting legislation on the floor. But I wanted to stop by to make sure that the subcommittee understands that this is a very, very important investigation that we're doing. It's important for many reasons. First of all, it's important because it cost the taxpayer $20 million for something that was failed. Even more importantly, it cost the employees $166 million, with the way their funds were misused, and puts the union on the verge of bankruptcy. Now there will be a lot of distractions, because whenever you want to take someone away from the focus that they have, you come up with all sort of distractions and sometime the press helps with those distractions--pulling things out of the air, I'm not sure what air they breath, but it must be different air than I breath because all of those things that I read about have nothing to do with reality. I just want to encourage the committee to stay tough. I realize they're many reasons why people want to move you away from your focus, but you can't allow that to happen. There's too much as stake. I'm just here to reinforce the fact that we have a big job to do and it's a top priority for this committee. Thank you. Chairman Hoekstra. Thank you, Chairman. Ms. Mink. STATEMENT OF THE HON. PATSY MINK, CONGRESSWOMAN FROM THE STATE OF HAWAII Mrs. Mink. Thank you, Mr. Chairman. I want to assure the majority, and in particular the chair of the subcommittee, that the minority is equally concerned about the way in which the elections of the Teamsters were conducted and of the abuses that occurred which have come to light. And we are anxious to participate in that aspect of our authority to provide oversight and investigative inspiration into fact finding about that election. But I was unaware until this moment that we have now extended the jurisdiction of this subcommittee to investigate the ways in which monies collected by the International have been spent for purposes that it deemed were appropriate by vote of the conventions held by the Teamsters, and I'm somewhat taken aback at the enlarged jurisdictional oversight that you have laid out this morning. With respect to this hearing, we on the minority side are very much interested to see what information and what insights these witnesses can provide as we examine the conduct of the Teamster's officials with respect to the elections that have now been set aside. That, to me, is a germane inquiry of this subcommittee and in that pursuit we are anxious to hear the testimony that these witnesses can provide. We are at a great disadvantage, Mr. Chairman, because as you know, we were not provided with much more than the names and the cities from which these witnesses were coming and that information was not provided us until yesterday at 11:37 a.m. We have not received prior to coming to the committee room this morning at 10:00, copies of their testimony. So I apologize if the minority appears somewhat unprepared to deal with the substance of the testimony, which I'm sure has been thoughtfully prepared and will be very, very interesting to receive. I might suggest, Mr. Chairman, that, if the witnesses will agree, that perhaps the minority can propound some questions to them after the hearing today when we have had time to review the testimony. But given the circumstances and the great detail that we have been provided by each of the witnesses, it will take us time to look them over. I feel that the inquiry as to how Federal dollars were spent for the supervision of the election is an appropriate inquiry of this committee. In that context, we have had the election officials come to testify as to their jurisdiction and their inquiry. But at no time in that testimony did any of the election officials indicate that they had the power or authority to examine how the funds of the union were being spent with respect to the organizing of their union to acquire new members, nor how they spent the money with respect to the support and sustenance of their membership who were on strike. So, I think we are going far afield of the purpose of the inquiry and that is, to see to what extent the Federal Government's authority which was given under the Consent Decree has been explicitly adhered to, and to what extent this committee can recommend additional legislation to perhaps remedy the complaints and other criticisms that will be brought forth to this committee today. In that context, I shall be very interested to hear the witnesses and their suggestions as to how the Congress can enact legislation in their view, which will give the Federal Government greater powers of oversight in the management and conduct of the internal affairs of this union and every other union. Thank you very much. Chairman Hoekstra. Thank you. I think as the ranking member knows, this is a permanent subcommittee. We're well within our jurisdiction. In fact, if we felt it necessary, the investigation could be much broader. Without objection, the opening statements of any other member of the subcommittee will be included in the record. Chairman Hoekstra. I'm now pleased to introduce our first panel of witnesses. The members of this panel are prominent current and former officials of the IBT. Each of these witnesses became alarmed about the financial condition of the union, tried to get information from the Carey administration about the Teamsters deteriorating finances, and will testify that they were retaliated against for their inquiries. This morning we will hear from Mr. Sam Theodus who is from Cleveland, Ohio, who served as an IBT International Vice President from 1992 to 1997; we will also hear from Mr. Joel LeFevre from New York City, who is currently Treasurer of the Teamster's Local 840 and has served in that position since 1986; we will also hear from Mr. Robert Simpson from Chicago, Illinois, who served as an IBT International Trustee from 1991 to 1994; and we will also from Mr. Bob DeRusha from East Hampstead, New Hampshire, who served as an IBT International Trustee from 1989 to 1996. And especially to you, Mr. DeRusha, after having gone significant surgery a couple times in the last six months, as recently as three weeks ago, thank you very much for being here this morning. Welcome to all of you. I'll ask you to summarize your testimony and without objection, your full testimony will be included in the hearing record. Before receiving the testimony of these witnesses, the Chair will ask each of the witnesses--or the witnesses--to take an oath. The witness should also be aware that making a false statement to Congress while under oath may be prosecuted under law. In light of this, will the witnesses please rise and raise your right hands. [Witnesses sworn.] Chairman Hoekstra. Let the record reflect that each of the witnesses has answered in the affirmative. Please be seated. Mr. Theodus. TESTIMONY OF SAM THEODUS, FORMER VICE PRESIDENT, Mr. Theodus. My name is Sam Theodus. I have been a member of truck drivers' union local 407 in Cleveland, Ohio, for a period in excess of 45 years. My history in the Teamsters has brought me here today to summarize, after many years of efforts, on behalf of reforming the union. I ran against Jackie Presser for the office of international president during the 1986 convention. Later I joined the Ron Carey slate at his request as a candidate for international vice president at large in the 1991 election for international officers. Our promises of reform, including fiscal responsibility, were then swept away by the Carey administration through high-handed tactics and abuses of power. This forced my separation from the Carey regime for many reasons, a number of which are set forth below. Our pledge to the membership during the 1991 campaign was thereafter violated in every way, reducing the once the most powerful of earth to an organization of the verge of bankruptcy and totally divided in it's efforts. I believe that it is fair to state that my efforts on behalf of reforming the Teamsters date back to the 1970's and I have long been an advocate of the right of the rank and file members to directly elect all of their officials at all levels of the union structure. At the outset of this testimony I want to make it clear that despite the events of the past six years, I continue to believe in this great union. However, I must admit that I fear for the future of this union and am totally disillusioned, disappointed, disgusted, and dismayed with the events of the past six years that have brought this union to the brink of destruction. Today our union is virtually bankrupt and totally divided. A fairly stated history of this union for the past six years and any complete and objective investigation will show clearly that the sad state of affairs presently existing can be traced to one basic problem--the instruments of reform were unfortunately placed in the hands of the wrong people. It is often said in our business that hindsight is 20-20. However, the record of this matter will show that these concerns and objections, the actions of the Carey administration, were voiced widely within the union itself and publicly as the events transpired. It was in 1986 that I believe I first gained a reputation throughout the Teamsters nationally, as a supporter of reform when I ran against the incumbent Jackie Presser, a fellow Clevelander, for the office of international president. I sincerely hope that my efforts in 1986 gave some impetus to the reform movement within the Teamsters, which would grow dramatically in the years to follow. Along with the other supposedly reform minded Teamsters, I was swept into office in 1991, as international vice president at large on Ron Carey's reform slate. I'd worked very hard for Ron Carey during that campaign and honestly believe that our election was the dawning of a new a day for the Teamsters and that better times lay ahead. I had high hopes that with the help of the court under Judge Edelstein, the IRB under Judge Lacy, and because of the members' right to elect their officials, we would be able to clean out those individuals that were tied to organized crime and restore the Teamster's union members pride. However, after eight years of government supervision, we find that what looked like a solution to the many problems of troubled Teamsters passed, turn out to be a vehicle that brought about a new era of corruption and greed, allowing the Carey administration to conduct a reign of terror by malicious prosecution of it's detractors while they themselves engaged in various acts of corruption. When the Carey administration took office in February of 1992, it promised to be fiscally responsible and to conduct an open administration about the union's actions and policies. We were to discover sadly that virtually the exact opposite occurred. When morning merges from the rubble of this administration, we find the union virtually broke and divided. It is extremely difficult to comprehend how we got to this point from the hope and promise of 1991. In order to even begin to understand this, one must recognize what the personality of the Carey administration became. It became an administration that was singularly and compulsively obsessed with the perpetuation of it's own power. Internal union politics played a part in virtually every decision made by the majority of the general executive board. It became an administration that abused all the powers of the general president and the general executive board in the areas of union disciplinary procedures, the implementation of trusteeships, the merging of local unions, and the manipulation of joint council jurisdictions, to punish it's enemies and reward it's supporters in virtually every opportunity that was presented. Abuses of power ran rampant under the guise of reform. The administration engaged in systematic character assassination using the IBT communications department and malicious prosecution of it's opponents within the union, using the IBT legal department. If one became a Carey supporter, they were anointed with a title of new reform Teamsters, regardless of their past history. Opponents of the administration, regardless of their past history, were vilified as old guard Teamsters, which equated in the public relations barrage of the international for being corrupt or soft on corruption. The frequent cynical use of mob references became an essential part of the Carey rhetoric. It became an administration totally devoted to the centralization of power at the international in Washington to the sacrifice of local union autonomy and consequently to |