The president of the largest union in the AFL-CIO yesterday defended the integrity of his organization after revelations that it had filed insurance claims totaling $4.6 million in an attempt to recover money lost to embezzlements and other financial fraud.

In a letter to all local union presidents, Gerald W. McEntee, president of the 1.4 million-member American Federation of State, County and Municipal Employees, said: "AFSCME has the deepest commitment in the labor movement to root out wrongdoing. Under our zero tolerance policy, we have procedures in place to ensure that our members' dues are properly spent."

McEntee noted that AFSCME audits all District Councils, the regional umbrella groups for local unions, and all local unions with more than 2,000 members. "Where we find problems we take action--we remove anyone who misappropriates union funds, we work with authorities on appropriate criminal charges and we work to recover financial losses," he said.

Only a handful of union officials--35 or 40 out of 28,000--were involved in financial fraud, according to McEntee. "You're always going to have some measure of corruption in an institution this size," he said.

It was unclear yesterday whether federal law enforcement officials would investigate the financial irregularities involved in the report. Almost all the crime revealed in the report has been written about extensively by the news media and much of it has already been before the courts. The federal government has little jurisdiction over much of the union, which is covered by state and local labor law. The Labor Department is not expected to take any investigative action, according to a source.

Chris Watney, a Justice Department spokeswoman, said, "Normally these cases would be handled by the FBI, the inspector general at the Department of Labor or the Office of Labor Management Standards." None of these entities has approached the Justice Department formally about the matter, though a review of the alleged wrongdoing is considered likely. Watney said the Justice Department does not comment on possible criminal matters.

McEntee's letter was in response to disclosures in the New York Times last week that the union had filed bonding claims of $4.6 million with its insurance carrier, the St. Paul Co. The claims were outlined in a confidential bonding report distributed to members of the union's international executive board.

A copy of the report, obtained by The Washington Post, shows that the overwhelming majority of the claims--$4.2 million--involved AFSCME's embattled District Council 37 in New York City. Another $98,000 in claims were from District Council 20 in the District of Columbia.

The remaining $300,000 in claims, according to the report, were spread around the country and involved comparatively small-scale fraud, primarily expense account cheating. For example, a local union official in Pennsylvania was accused of failing to repay a $1,398 convention advance after failing to attend the convention.

Larry Weinberg, AFSCME general counsel, said the amount of claims normally sent to the bonding company in any given year totals around $300,000, most of it for petty fraud.

District Council 37 is the umbrella group for 56 local unions. So far, nearly two dozen officials have been indicted after investigations the union says were started with information it turned over to local law enforcement officials.

McEntee, in an interview, said the corruption reflected in the bonding report was the result of an independent audit system set up within the union two years ago. "We found every piece of corruption. It was us," he said.

McEntee acknowledged, however, that it was a "no-win proposition. We're getting a black eye for exposing corruption."

Many of the local unions whose entire membership works for a state or local government are not covered by federal labor law and many states do not have laws governing public employees, according to AFSCME officials.

At its 1998 convention, AFSCME voted to conduct annual audits at all its District Councils and its larger local unions. McEntee said the decision to seek such authority from convention delegates came after the union began receiving reports about troubles in New York City.

In speeches to union audiences, McEntee has praised the new audit scheme. Shortly after the convention, he told a group in California: "I believe, the delegates believed, and I hope you will agree, that this step will help guarantee the financial integrity of this union."

Staff writer David A. Vise contributed to this report.