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Union leader Stern leaves with questions over spending

By Alec MacGillis
Saturday, May 15, 2010; A02

In celebrating her election last weekend to head the Service Employees International Union -- the nation's fastest-growing and most politically active labor organization -- Mary Kay Henry vowed to "build on the success" of Andrew L. Stern, the charismatic, ambitious labor leader who is taking his influence to new arenas, such as President Obama's deficit commission.

But the state of the union Stern is leaving behind is more mixed than Henry let on. Even as Stern turns to the nation's spending problem, his own union's spending -- notably the multimillion-dollar tab from internal battles he has waged -- is drawing sharp criticism from within the labor movement. Stern has expanded his union, but his decisions have left it and the labor movement as a whole financially strapped, according to disclosure reports.

Stern has played an active role in Washington, visiting the Obama White House more than three dozen times and overseeing his union's prominent role in the health-care overhaul. The 1.8 million-member union has also grown in a time of labor decline, making Stern the most consequential labor leader of his era.

Spending by his union, however, increasingly has been driven not by the usual priorities -- organizing workers and helping elect political allies -- but by internal strife, records show.

In 2008 and 2009, SEIU sent hundreds of its officials to California for a turf war with a big breakaway chapter, spending $2.5 million each year on hotels in the state, a fivefold increase from 2007. In Fresno alone, the union spent $300,000 on lodging before narrowly winning an election over dissident leaders.

The battle in California helped drive up SEIU's legal costs last year by 64 percent, to $11 million. That amount also reflected a showdown with the hotel and restaurant workers union and the fallout from corruption allegations involving several Stern loyalists.

Other expenditures in 2008 and 2009 include a $17,000 bulk purchase of Stern's book; $46,000 to a little-known Hollywood actor for "public persona development" of SEIU officials; and $1 million to a filmmaker who made a movie about SEIU.

Stern vigorously defends the union's $300 million budget. He notes that its finances improved last year, into the range of other high-spending unions. And he said SEIU needed to expend money on internal battles for protection from people who sought to weaken it from within.

"It's a tragedy in terms of how the money was spent, but a necessity in terms of preserving the organization's integrity," he said. "I don't want to analogize this, but there is not enough money you can spend in America to protect us from terrorists. And you know, sometimes you have to spend money to protect the integrity of the institution from its own version of self-righteousness and terrorism."

'Destructive' battles

Critics note that the millions of dollars in union dues devoted to internal disputes -- both by SEIU and rival unions -- could have been spent on organizing or advocating for labor's top priority, stalled legislation that would make it easier to organize workers. To bring its spending closer into balance last year, SEIU cut dozens of organizers; its growth slowed to 50,000 new members, from 115,000 in 2008.

"These sort of fights have been absolutely destructive," said Bob Bruno, a labor relations professor at the University of Illinois at Chicago. They "are not focused on what the real objective should be. Too much money is being spent vilifying each other, chasing their own tail."

Since Stern, 59, rose from being a Pennsylvania social worker and took the union's helm in 1996, it has doubled in size and has become a political force. It has pumped millions of dollars into election campaigns, and purple-shirted SEIU workers are a regular sight at protest rallies.

But Stern has had a polarizing impact on the movement he sought to revive. His 2005 creation of a federation to challenge the AFL-CIO left a rift, even as his alliance, Change to Win, has fallen short of its organizing goals.

His strategy also sparked discord within SEIU. Instead of traditional organizing to win union elections, SEIU spent heavily to elect governors who opened up public employees to unionization. And it has cut deals with companies that would allow certain workplaces to unionize in exchange for employer-friendly terms.

Stern argued for growing membership, whatever it took; others saw such deals as undermining workers. The disagreement intensified as Stern consolidated chapters and centralized power in Washington.

That conflict played out most bitterly in California, where leaders of a 150,000-person SEIU chapter based in the Bay Area criticized new contracts as too weak and resisted plans to move 65,000 long-term-care workers into a new statewide chapter. In early 2009, SEIU ousted the dissident leaders, who then formed a new union that is trying to reclaim its former members.

SEIU spared no cost to quash the dissidents. It paid Ray Marshall, a former U.S. labor secretary, $176,000 to conduct a 2008 hearing on the dispute, which included SEIU's accusation that the dissidents secretly shifted funds to prepare for their breakaway (the dissidents have denied doing this). Marshall played down the importance of the funds but gave the go-ahead to oust the dissidents.

In addition to its hotel costs in California, the union spent $200,000 on security firms to guard its officials in the state. Some officials stayed so long that the union rented houses for them. The union said it made a clerical error when it reported a $15,400 "consulting" payment to Sharon Pelle in Berkeley, which Pelle, owner of the I Touch You massage therapy business, said was payment to rent her house.

Last month, a San Francisco jury ruled in SEIU's favor in a financial dispute with the dissidents. But the breakaway union has won several elections, netting it 3,600 workers, and its officials are confident about winning thousands more in coming months.

Spending questioned

The latest drain on SEIU's coffers has been its intervention in the divorce of the textile workers' union, UNITE, from the hotel and restaurant union, HERE. Stern is an ally of the head of the UNITE side and SEIU formed an affiliate, Workers United, to absorb workers from the split.

SEIU says it has gotten 100,000 workers into Workers United, which the hotel union disputes. But SEIU has had to heavily subsidize the affiliate while it fights in court for its assets. Workers United brought in $10 million in dues but spent $19 million, and lists $3.9 million owed to SEIU. Stern admitted some regret.

"Now everybody gets 20-20 hindsight," he said. "It's like saying, 'We're going into Iraq and we'll be out in a month,' and after six years you say, 'If I knew it would have been six years, is this what I would have done?' I made a decision based on what I thought was going to happen."

Stern says he uses a simple standard for spending: thinking of an SEIU janitor. "Every two weeks, he takes a little bit of his dues and gives it to the union," he said. "When we think the union is about our life and not his, we've sort of lost our moral compass."

That outlook has not kept SEIU from spending on its image. In 2008, the union paid Simon & Schuster $17,000 to buy hundreds of copies of Stern's book, "A Country That Works," for its convention. Union officials say Stern did not benefit from this.

It also spent $1 million in 2008 and 2009 on Catalyst Media Productions as it made "Labor Day," a movie about the union. The filmmaker "sold us on 'you can make this movie that everyone would want to watch,' " Stern said. "We believed him, and it didn't work."

In the race to replace Stern, Henry beat his anointed successor, Anna Burger. But Stern is confident the union will stay its course. Henry supports the move against the California dissidents.

"The discussion as I'm hearing it in the union," Stern said, "is about who . . . can build on what's happened here -- and not tear it down and change it."

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