Labor Union Bosses’ Secret Slush Funds to Be Laid Bare

Amid the finger-pointing over accountability and transparency on Wall Street, virtually unnoticed is a new disclosure rule issued last week by the Labor Department that forces unions to make public huge slush funds hidden for half a century.

At issue are T-1 trusts—rainy-day funds initially designed to retrain union workers in the event of workplace changes. The trusts were originally known as “nickel funds” because companies would contribute 5 cents for every hour worked by a union member, but current contributions can run as high as $10.

So how much money are we talking about? Aside from Big Labor bosses, no one rightly knows.

Since the funds aren’t taken directly as dues from a worker’s paycheck—they are pledges by the company as part of an overall collective bargaining agreement—union bosses have argued, effectively, that their own workers have no business knowing about them. And although the governing Labor Management Reporting and Disclosure Act, enacted in 1959, demands that unions make available to their members a full accounting of union finances, successive administrations failed—or refused—to fully enforce the law.

The suspicion, however, is that the trusts are essentially offshore accounts worth hundreds of millions of dollars. And while occasional stories surface of them being used to sponsor NASCAR races or political convention receptions, no one knows how the money is spent. But a good guess is that it’s not purely on behalf of workers and that labor bosses are supplementing their union salaries (which must be publicly disclosed) by also drawing pay for “administering” the trusts.

Private-sector unions have taken a hit in recent years, and a good deal of the credit goes to Secretary Elaine Chao’s Labor Department, which has been one of the few consistent bright spots in the Bush administration.

Working quietly and effectively, Chao has secured greater transparency to union books and aggressively targeted corruption. Under her whip, labor bosses like the Ironworkers’ Jake West can no longer bury $1.5 million in food, booze, and yacht-club fees as “office” or “educational” expenses, and the National Education Association can no longer itemize $69 million in a single year as nebulous “grants to joint projects with state and local affiliates.” Since Chao took over in 2001, the Labor Department’s scalp wall now boasts nearly 900 criminal convictions, most involving union-fund embezzlement.

Labor union leadership is fond of beating up on companies for allegedly failing to care about the workers they employ. It’s about time that these union bosses are subjected to the same scrutiny.