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Chicago federal judge ends 40 years of oversight for union pension funds

The ruling dissolves two 40-year-old consent decrees giving the Department of Labor oversight of multibillion-dollar Teamster pension and welfare funds.

CHICAGO (CN) — In October 1978, the U.S. Department of Labor sued then-Teamsters President Frank Fitzsimmons - and many others - over alleged mismanagement of the Teamsters' multibillion-dollar Central States, Southeast and Southwest Areas Pension Fund. The government claimed Fitzsimmons and the rest of the fund's trustees had approved a series of massive loans as a front for funneling money to organized crime outfits.

The department filed a similar complaint in 1982 against trustees for the Teamsters' Central States, Southeast and Southwest Areas Health & Welfare Fund, most famous among them longtime Jimmy Hoffa associate - and 1983 murder victim - Allen Dorfman.

The government prevailed in both cases, with the northern Illinois federal court entering two consent decrees in 1982 and 1985, respectively, that gave the Department of Labor oversight over both funds. The consent decrees mandated that the funds' assets be managed by a court-appointed fiduciary, and that the U.S. secretary of labor regularly consult with the funds' managers over their investment policies and Boards of Trustee appointments.

But as of Friday, those consent decrees are no more. In an afternoon ruling, U.S. District Judge Thomas Durkin ended the court's enforcement of both decrees, finding they had achieved their goals of "quell[ing] the influence of organized crime" in the management of pension funds.

The Barack Obama appointee said he followed the recommendation of independent special counsel David Coar, himself a former Bill Clinton-appointed federal judge in the Northern District of Illinois, in making his decision. According to Coar, Durkin wrote, "the funds’ Trustees and their staff are competent, professional, and in compliance with [the Employee Retirement Income Security Act of 1974]."

Durkin also pointed out that in the four decades since the court began enforcing the consent decrees, the Department of Labor had not once found either fund in violation of ERISA, which guarantees basic protections for individuals enrolled in pension plans.

Despite this, the Department of Labor opposed Coar's recommendation to dissolve the consent decrees. Labor Solicitors Seema Nanda and Wayne Berry, arguing on behalf of acting U.S. Labor Secretary Julie Su, agreed in a separate June 2 court filing that the decrees had thus far achieved their purpose of keeping organized crime away from the funds. But they also noted that it was unsupervised union leaders and fund trustees who enabled mob deals in the first place. Without the federal government keeping them honest, the pair wrote, there was no guarantee that history wouldn't repeat itself.

"The conduct underlying the Consent Decrees involved repeated violations of ERISA when the Funds made inappropriate loans with unfavorable terms spanning many years," the June 2 filing argues. "Dissolution of the Consent Decrees and placing management of the Funds’ assets back in the hands of the Boards of Trustees without any constraints on their actions, places the participants and beneficiaries at greater risk than they currently face."

Nanda and Berry also noted that under the American Rescue Plan Act of 2021, the federal government granted the Central States Pension Fund $35.8 billion in financial assistance. They argued that the court ought to preserve the consent decrees so that the department could monitor how the fund's trustees would handle that windfall.

"The Secretary respectfully suggests that the time to test whether the Consent Decrees can be safely dissolved is not when the Pension Fund has just received an unprecedented infusion of $35.8 billion taxpayer funds," they wrote.

Durkin waved off the concerns. He said that because the consent decrees had been eligible for dissolution since 2007 and the funds had a spotless 40-year record of ERISA compliance - and because Dorfman and Fitzsimmons are long dead - the court "is no longer concerned about the threat of the Funds being mismanaged or used as a front for organized crime."

"It is no longer an efficacious use of resources and time to require the fiduciary’s, [special counsel's], and [Department of Labor]’s continued monitoring of the Funds’ assets, Boards of Trustees, or investment policy statements," Durkin wrote.

As of 2021 the pension fund had a net asset worth of over $8.7 billion, with the funds together benefitting workers for over 1,400 employers in 169 unions - most of them Teamsters locals.

In November 2021, a Teamsters political faction known as Teamsters United won several important elections in the international union's leadership, ousting the faction that had been in power since the latter days of Jimmy Hoffa - the faction to which Fitzsimmons and Dorfman belonged.

No representative of the Teamsters' general leadership responded to a request for comment on what Friday's ruling means for the union. But experts with whom Courthouse News has previously spoken have said that Teamsters United's representatives, like current union General President Sean O'Brien, are taking a much harder stance against corruption and employer collaboration than their predecessors.

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