02.01.2009 0

Obama Makes Financial Transparency First Casualty of His Labor Department

  • On: 02/03/2009 09:45:42
  • In: Economy
  • By Nathan Mehrens

    As ALG News previously reported, President Obama’s payoff to Big Labor for their valuable campaign support has already started.

    First the President issued several union-friendly Executive Orders including one repealing President Bush’s executive order requiring federal contractors to post notice that workers do not have to pay for the political expenditures of their unions. This notice is commonly known as the “Beck Poster.”

    Now another assault on worker rights is emerging, this time from Mr. Obama’s Department of Labor. The new Administration is only a few days old and already the Obama Labor Department is hard at work undoing the union financial transparency regulations that the Bush Administration spent eight years updating.

    When President Bush entered office, among the many matters needing urgent attention were the financial transparency regulations intended to shine a light into the murky underbelly of labor union finances. These disclosure regulations are issued pursuant to the Labor-Management Reporting and Disclosure Act of 1959 that among other things requires labor organizations to file annual financial disclosure reports with the U.S. Department of Labor.

    The Act gives the Secretary of Labor the discretion to determine what information is reported on the disclosure forms. While the Act had been on the books for nearly fifty years it had never been fully implemented by the U.S. Department of Labor until the Bush Administration arrived on the scene. Early in President Bush’s first term the Department of Labor, under Secretary Elaine L. Chao, began the arduous task of updating and fully enforcing these neglected regulations, a process that ultimately took eight years.

    Until President Bush came into office, the financial reports required only disclosure of basic information about financial disbursements, and this information was aggregated into massive categories that allowed “disclosure” in the form of line items containing tens of millions of dollars. For instance, the National Education Association reported $68,712,248 on a single line for “Grants to joint projects w/state & local affiliates.” No further details were provided or required.

    In 2003 the Labor Department issued a new final regulation that greatly increased the information available to union members and the public, requiring unions to disclose many of their expenses in an itemized manner.

    Then, in 2006 the Department began work to fix a few issues that were not addressed by the 2003 changes. These fixes were finalized three years later, just a couple weeks ago in fact, on January 16, 2009. (The changes were officially published on January 21, 2009.) It is these recent changes that Obama’s Labor Department is now attacking.

    Here is what the most recent changes will disclose if allowed to become operative:

    1. Sweetheart deals involving the purchase or sale of union property (such as if a union officer buys a union car worth $30,000 and only pays $5,000 for it);

    2. Deferred compensation and other benefits received by union officers and employees;

    3. The source of union receipts. This will allow members to better track how the union bosses move their money.

    In addition, the recent change enables the Labor Department to require more detailed reporting from small unions when the Department finds that there are serious delinquencies or deficiencies in the reports filed by these unions.

    But this—like all of the above changes—is now in danger of being permanently sidetracked by the new Administration. And some find it surprising that in a time when financial transparency and executive compensation are hot button issues, the Obama Administration is moving so quickly to reduce the information disclosed regarding the executive compensation of union officials.

    This is not a small matter. When the Labor Department began looking into this issue in 2006 it uncovered cases where union officials were paid hundreds of thousands of dollars that were not disclosed on the unions’ financial reports. For instance, John Sweeney, president of the AFL-CIO received over $230,000 in one year to fund the tax liability on deferred compensation benefits that became vested to him in that year. This $233,000 payment was not required to be included in union’s disclosures and as such it appeared that the union officer received substantially less than he actually did.

    Despite public comments regarding the importance of financial transparency, it now appears that the Labor Department under Obama is moving in the opposite direction. One is left to imagine the uproar that would have occurred if the Bush Administration in its first few days in office decided that the public didn’t need better information on the executive compensation of corporate officers.

    Action Item:

    The Labor Department’s notice requests public comment on whether to delay or rescind the new financial reporting regulation. A copy of the notice is located here:


    To submit comments go to www.regulations.gov and search for “Labor Organization Annual Financial Reports.” You should be able to submit comments starting tomorrow, the official publication date of the notice, February 3, 2009.

    The comment period regarding the effective date of the existing regulation ends on February 13, 2009.

    The comment period on whether to rescind the existing regulation ends on March 5, 2009. If you believe financial transparency for unions is healthy and needed then submit comments as described above.

    As someone who spent considerable time working on these regulations I can attest that the comments submitted are read and must be considered in order to comply with all the various statutes that govern the regulatory process. These comments do not simply go into a black hole, but can have a serious impact if they deal with specific issues and don’t just parrot back that “this is good” or “this is bad.”

    Nathan Mehrens is an ALG News contributor and a former Labor Department official.

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