Labor Secretary Raymond J. Donovan yesterday announced that the trustees of the Teamsters Central States pension and health and welfare funds have agreed to repay $6.5 million--the largest such settlement ever--in order to end government lawsuits charging misuse of union funds.
About 500,000 rank-and-file beneficiaries of the two funds, whose assets total about $5 billion, now can "sleep at night, assured that . . . there will be no abuse or misuse of their hard-earned dollars," Donovan said.
"We have a new day at Central States," said the funds' executive director, George Lehr. "Shame on us if we in any way blow that . . . . "
The settlement, which requires court approval, would not resolve other civil suits by the government against five former fund trustees, including the Teamsters' new president, Jackie Presser. The liabilities in those cases should exceed $35 million, according to the Labor Department, with only $2 million covered by the defendants' insurance.
The latest action terminates all claims, current or "in the pipeline," by the government against the funds as institutions or against the funds' current trustees, all of whom have been appointed since 1977. The former trustees were forced to resign at that time as pressure intensified to clean up the operation after decades of scandal linking the funds to organized crime.
Donovan praised the current trustees for their cooperation and added that they "have asked for a new day, and with these agreements they have earned one." He and other government officials have singled out Lehr for praise since he took the executive director's post in 1981.
The $6.5 million reimbursement, which includes the current trustees' legal defense costs, will not come out of their pockets but will be paid by their insurance carriers, who, after lengthy negotiations with the trustees, decided they'd "rather pay than litigate," according to Lehr. As to the effect of this, he said dryly: "There's no indication we're going to have a lower premium."
Under the new agreement, the trustees must sell their $2.5 million Falcon 20 jet within 75 days and refrain from owning a private aircraft in the future. That ends a practice dating back to the 1950s, officials said.
They also agreed to end dealings with criminals and, in particular, all entities related to the late Allen M. Dorfman, the insurance executive whose firm processed claims for the Teamsters. Dorfman was shot to death in January in Chicago after being convicted with Roy Lee Williams, then the union's president, on charges of bribery and conspiracy.
The government had charged that the trustees made "substantial overpayment" of fees to Dorfman's firms. Now the government and the trustees jointly are suing the Dorfman interests in Chicago, an action Donovan said will net "millions."
The agreement also resolved government charges that the trustees had allowed fund assets to be spent "imprudently" on undeveloped Florida real estate.
A consent decree last September placed the pension fund under new safeguards, including independent management of its assets by a major fiduciary entity and the installation of former attorney general William B. Saxbe as special counsel to monitor the funds. The new agreement extends that condition to the health and welfare fund, establishing mechanisms to "preserve these achievements," Lehr said.
The health of the fund is "generally good," Saxbe said yesterday, although it still has a few small "problem loans . . . dating back to the old days when they were heavy in Las Vegas and . . . that type of thing."
Presser, who was not involved in the settlement negotiations, issued a statement supporting the agreement, saying, "There is no benefit to be gained in continuing this history of litigation."
The settlement brings to about $22.5 million the amount that Donovan's Labor Department has recovered or restored under the Employee Retirement Income Security Act, the secretary said.