Sen. Orrin G. Hatch (R-Utah) yesterday accused the Labor Department of failing to protect union pension funds against repeated abuses by corrupt labor leaders and organized crime figures, in some cases for so many years that the law can no longer be enforced.
Hatch, chairman of the Senate Labor Committee, opened what he indicated would be a year-long series of hearings into the department's handling of pension fund cases since passage of the Employment Retirement Income Security Act of 1974 (ERISA).
"The stakes are high," Hatch said in an opening statement. "Currently there are more than 50 million workers in 560,000 pension plans. And the present value of those plans is more than $550 billion. We must ensure that the Labor Department is adequately protecting those assets."
Timothy Ryan, the Labor solicitor who was the first witness, said he has ordered an internal investigation of 11 cases thus far and has turned up "allegations of serious impropriety" within the Labor Department in the handling of two.
He said one involves a pension fund set up at a Clarksburg, W.Va., glass company for members of the United Glass and Ceramic Workers. The case concerned purchase of the glass company's stock by a Pittsburgh bank that was managing the pension fund.
"The enforcement people felt it was a violation and referred it to the solicitor's office in 1979," Ryan said. But it slipped past the statute of limitations sometime in late 1980 or early 1981, he said. Ryan indicated that it took the bank's lawyers to make the Labor Department realize that it was too late to do anything about it.
The Labor Department lawyer in charge of such cases, Associate Solicitor Monica Gallagher, acknowledged, "This was a very bad example of what can go wrong.
"We were overloaded," she told Hatch. Then, "when we got to it, we mis-analyzed it." Belatedly, she indicated, her office realized that the bank's attorneys were right.
Hatch said one internal Labor Department summary secured by his investigators during almost a year of arduous negotiations suggested that 34 of the 163 cases "closed" by Ryan's office in 1981 either had expired or were about to expire because of the statute of limitations during 1981.
Most of yesterday's session was spent on what Hatch called the Labor Department's "bizarre handling" of the Southern Nevada Culinary Workers and Bartenders Union Pension Fund.
Hatch charged that Morris Shenker, who owns a controlling interest in the Dunes Hotel and Casino in Las Vegas, had been milking the pension fund systematically by borrowing millions of dollars from it without repaying the money.
Labor Department investigators concluded years ago that the $15 million lent to corporations controlled by Shenker or his family after passage of the ERISA were "prohibited transactions" because the Dunes Hotel is a employer that makes contributions to the pension fund. Additional pre-ERISA loans of $9 million have been in default since 1975, Hatch said.
As of last May, Shenker owed the Culinary Fund $45 million on the $24 million in loans, including principal and interest, according to Labor Department records. Hatch said the solicitor's office, particularly Gallagher's section, insisted on filing a civil suit, which has yet to come to trial after five years, and frustrated suggestions for criminal prosecution.
Thomas Kane, the reporting and enforcement divison chief in Labor's Pension and Welfare Benefit Program, testified that he kept recommending calling Shenker's loans due, on the grounds that Shenker would come up with the money rather than risk loss of his Nevada gambling license.
But he said Gallagher kept put- ting him down, telling him at one meeting, " 'Kane, you just p--- me off!' "
Gallagher is to return to the witness table today. From Las Vegas, meanwhile, Shenker, 75, protested that "I've never defrauded anyone in my life. This is just another case of someone not knowing the facts."