Teamsters President Frank Fitzsimmons allowed his son Donald to promote a multimillion-dollar life-insurance swindle of union members, a Senate subcommittee charged yesterday.
The Senate Permanent Investigations Subcommittee report also said that Fitzsimmons permitted his home local in Detriot to adopt the fraudulent insurance plan, apparently knowing it would not benefit the members.
Fitzsimmons denied he had supported the insurance scheme, adding: "As would any father, I generally wished Don well in this endeavor, but in these matters he did not speak for me" or the union.
Subcommittee Chairman Sam Nunn (D-Ga.) emphasized there was no evidence Fitzsimmons violated the law. But Nunn said his conduct "poses a serious question as to a possible conflict of interest."
Donald Fitzsimmons was identified in the report as a promoter who shared in the profits of the insurance scheme devised by a convicted felon and insurance mastermind, Louis C. Ostrer.
Fitzsimmons' other son, Richard, was charged with embezzlement and cospiracy Feb. 4 in connection with the alleged insurance scheme in Local 299 in Detroit. Donald Fitzsimmons' attorney, Stuart Siani, was named as an accessory.
Senate investigators found at least 12 "Ostrer-type" life-insurance plans were established within the union between 1970 and 1975, using $5 million earmarked for benefits of 14,000 Teamster members in locals in New York, Michigan, Missouri, Florida, Pennsylvania and New Jersey.
The report said 76 per cent - or more than $3 million - of premiums went solely for commissions and fees. The big commissions were based on 14,000 individual life-insurance policies, instead of the usual group policies.
The report said "A serious question exists" whether Frank Fitzsimmons "fulfilled his responsibility" to the members when - knowing his sons' involvement - he allowed Teaster locals to buy insurance he apparently knew was "detrimental to the financial interests of the rank and file."
Donal Fitzsimmons told investigators his father was aware of a contract he signed Sept. 21, 1971, to promote Ostrer's insurance plans and share in their profits. He reportedly quoted his father as saying, "Donald, this is the best thing you could do."
The report indicates that Donald Fitzsimmons' influence enabled Ostrer to present his plan to Frank Fitzsimmons, the Teamsters' executive board and local officials. Frank Fitzsimmons admitted he was initially impressed by the plan.
The subcommittee received a letter from Frank Fitzsimmons on June 13, 1972, saying he knew the scheme was unsound. But the panel said he "still evidenced his support for this Ostrer-type plan" the following October, when he enrolled himself in the Local 299 plan.
The subcommittee report included the text of a committee interview with Frank Fitzsimmons in which he acknowledged knowing of Ostrer's criminal record and of reports criticizing the insurance plan.
The study found that in a New York Teamsters locak, $800,000 in insurance commissions was paid during a period when the commission cost would have been $10,000 had the local bought group term life-insurance instead of whole life policies. Commissions for whole life insurance are traditionally very heavy in early policy years.
Sen. Charles H. Percy (R-Ill.) said this practice "stripped group of the privilege of being a group; it was a blatant deprivation of union members' rights."