In addition to the alleged hanky-panky with the Hawaiian compliance fund, the plaintiffs claim, nepotism and a bad investment vehicle led to the evaporation of $50 million in IUOE pension funds. Defendant - and Western States Conference President - William Waggoner pressured local branches to invest their pension funds in Amalgamated Bank's product line, which were sold by Waggoner's wife Patricia, one of the bank's vice presidents, according to the lawsuit.
"In or about 2008, Patricia Waggoner first appeared at a Local 3 Pension trustee meeting to 'pitch' investments by the pension trust into the Longview Ultra Construction Loan Investment Fund and Longview International Value Equity Fund," according to the complaint. "Unable to give adequate answers to the trustees' investment questions, she essentially passed out flyers to the attendees, after which defendant Carl Goff, then vice president of Local 3, fielded questions with another Amalgamated Bank representative, Mr. Handworker, Ms. Waggoner's supervisor at Amalgamated. The fact that Ms. Waggoner was incapable of answering investment-related questions should alone have caused the trustees to have great concern about her investment proposals."
Neither Amalgamated Bank nor its employees are parties to the lawsuit.
After the meeting, Local 3 agreed to invest $100 million from its pension fund in the Longview Ultra Construction Loan Investment Fund; by the end of 2010, the fund had lost $50 million of the $90 million Local 3 had invested, the complaint states.
"The Longview Construction Loan Fund touted investments in construction loans as the mechanism for returns on investor assets," the plaintiffs claim. "However, many of the investments were poorly evaluated, as many of the major construction projects were never completed, forcing Amalgamated Bank to foreclose on a number of major real estate projects in an attempt to reduce losses suffered by the fund. The Longview Construction Loan Fund was an unsuitable investment choice for Local 3's pension funds, due to its risky and unsound investment practices. Pension investments must be protected from the risk of significant loss, and the trustees of the Local 3 OE Pension Fund failed to do that. The officers of Local 3 breached their fiduciary duties by encouraging to the point of requiring investment by the Local 3 OE Pension Fund in the Longview Construction Loan Fund. William Waggoner breached his fiduciary duty to the members of Local 3 when he utilized his position as first vice president of IUOE and western states conference president to pressure Local 3 to invest in the Longview Construction Loan Fund in large part to benefit his wife, Patty Waggoner, at Amalgamated Bank."
The plaintiffs claim the FDIC accused Amalgamated of "cooking the books" in 2011. Billionaires Wilbur Ross and Ron Burkle rescued the bank - the largest union-owned lender in the U.S. - from the brink of ruin with a combined $100 million bailout in 2012.
The plaintiffs claim the pension fund remains in the red and severely underfunded, though Local 3 officers call the fund's health "in the orange," according to the complaint.
Not all of the peeved union members' allegations involve money. They accuse Local 3 bosses of doing business with international organized crime, including Japan's Yakuza and the Triads of China, in the Pacific Rim islands of Guam, Samoa, Marshall Islands and the Philippines.
"Burns is not appropriately concerned about Local 3's dealings with organized crime rings, going so far as to remove one officer, William Kahlani Mahoe, who prepared a report detailing extensive corruption involving contractors on Guam," the plaintiffs say in the complaint. "Mr. Mahoe, the former Local 3 treasurer, was replaced with defendant Dan Reding and business continued as usual on the islands."
The plaintiffs continue: "The Triads refer to the many branches of Chinese transnational organized crime organizations or the Chinese mafia which are based in Hong Kong, the Philippines, Thailand, Macau, Taiwan, and within the islands which comprise the Pacific Rim, and also in countries with significant Chinese populations, such as the United States. The Triads currently engage in a variety of crimes, from extortion, money laundering, trafficking, and gambling and prostitution.
"Yakuza are members of transnational organized crime syndicates operating in Japan or in areas around the world with significant Japanese populations, such as in the Hawaiian Islands and the Pacific Rim islands. The Yakuza, like the Triads, are notorious for their strict codes of conduct and very organized nature. They have a large presence and operate internationally with an estimated 103,000 members. Local 3 allows contractors operated by front organizations for the Yakuza and Triads to operate double-breasted. There is no real compliance operation in Hawaii and the Pacific Rim, causing widespread injury to members, who are not employed due to the prevalence of non-union signatory construction operations."
Local 3 bosses use threats, intimidation and actual physical violence to quell dissent in their own rank and file and other businesses, the union members claim. They say bosses terrorized the manager of a construction company - and the man's wife - in an effort to force the company into a collective bargaining agreement.
Plaintiff Kenneth Mendoza claims he was beaten to a pulp at a union meeting for opposing what he viewed as a bait-and-switch pension multiplier change. He says Burns ordered the beating and enlisted help from local law enforcement - many of whom received campaign support from Burns - to cover up the assault.
Plaintiff Slack says Burns tried to terrorize his wife into keeping Slack silent about the corruption in Local 3, and used a nefarious union facility to do so: "Burns and other labor leaders within Local 3 conspired to terrorize Mrs. Slack at a time that they believed David Slack would be out of town, intending that by doing so they would silence plaintiff Slack. Local 3 operates an exclusive job referral hall that give[s] Local 3 knowledge about where a member will be for work and the associated best times to harass and intimidate a member's family at their home. In fact, through the use of an exclusive job referral hall, Local 3 can actually control the whereabouts of any particular member by virtue of where they dispatch them to work.
"Fortunately for Mrs. Slack, Mr. Slack was actually home, and armed, when armed Local 3 employees arrived at his home in furtherance of the conspiracy to terrorize Mr. Slack's wife. After tense moments, the management thugs departed."
The plaintiffs claim they continue to face reprisals from union leaders for trying to expose corruption. Some of the intimidation comes from the Hells Angels motorcycle gang, which Local 3 has sued since 2003 to keep dissident members in line, according to the lawsuit.
This is not the first branch of IUOE to levy charges of racketeering against the union. Last year, disgruntled members of Local 501 claimed bosses embezzled tens of millions of dollars and ran the union "with the same disregard for others' rights as the mob."
In addition to damages and treble damages, the members seek a permanent restraining order against all defendants, disgorgement and equitable relief for their ERISA claims.
They are represented by J. Mark Moore with Moore & Leviant of Woodland Hills.
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SAN FRANCISCO (CN) - The International Union of Operating Engineers cavorts with international crime syndicates, spends union dues illegally and intimidates dissenters with threats of violence, disgruntled union members claim in a federal class action.
