INVESTIGATION OF WELFARE AND PENSION FUNDS (LOS ANGELES AREA) WEDNESDAY, SEPTEMBER 22, 1954 HOUSE OF REPRESENTATIVES, SPECIAL SUBCOMMITTEE ON INVESTIGATION OF The committee met, pursuant to notice, at 10: 15 a. m., in room 229 Federal Building, Hon. Samuel K. McConnell, Jr., chairman of the committee, presiding. Present: Representatives McConnell, Holt, Lucas, and Miller. Present also: John O. Graham, staff director; Edward A. McCabe, general counsel; L. M. Weltmer, special counsel; Russell C. Derrickson, chief investigator; and Carmine S. Bellino, staff consultant. The CHAIRMAN. The hearing will please come to order. For several years there has been a question about the regulation and supervision of union welfare funds in order that the funds will be available to the beneficiaries, that would be wage earners, their families, and so on, when they need them. There has been considerable agitation for some type of regulation. I understand the funds vary in amounts from $17 million to $20 million, and with the exception of New York State, which acted recently, there has been no regulation of welfare funds in the country. Realizing the agitation in the situation in connection with these funds, President Eisenhower in his January 11 message on labor-management relations, recommended that Congress, and I now quote initiate a thorough study of welfare and pension funds covered by collective bargaining agreements with a view of enacting such legislation as will protect and conserve these funds for the millions of working men and women who are the beneficiaries. On February 17, 1954, the Committee on Education and Labor, of which I am the chairman, adopted a resolution unanimously. Í wish to read that resolution: Resolved, That the Committee on Education and Labor establish a subcommittee thereof to be known as the Subcommittee on investigation of Welfare Funds. The subcommittee shall be composed of 4 members of the majority party and 4 members of the minority party and a chairman appointed by the chairman of the full committee. The subcommittee shall be authorized to appoint a staff of not more than five employees. The subcommittee shall conduct a thorough study and investigation of welfare and pension funds covered by collective bargaining agreements, with a view of enacting such legislation as will protect and conserve these funds for the millions of working men and women who are the beneficiaries. It shall determine to what extent, if any, the requirements of present law are being violated by employers or unions in the creation or management of such funds, and to what extent such funds are 1 presently regulated or might appropriately be regulated by State authority. The subcommittee shall also investigate and and all instances brought to its attention of racketeering, extortion, graft, kickbacks, or gross misconduct committed by any person in connection with the handling of welfare funds. A later resolution was adopted by the Committee on Education and Labor July 27, 1954, which had to do with, you might say, the internal organization of these various committees and some of the rules: Resolved, That the chairman of the Committee on Education and Labor is authorized to appoint special subcommittees from the membership of the Subcommittee on Investigation of Welfare Funds which was established by resolution of the Committee on Education and Labor, February 17, 1954. Such special subcommittees shall be composed of not less than 3 members, at least 1 of whom shall be a member of the minority party, from which a chairman thereof shall be designated by the chairman of the full committee. All members of such special subcommittees shall be given reasonable notice of any sessions thereof. Such special subcommittees shall have the same authority in all respects, except that of appointing a staff, as that granted the Subcommittee on Investigation of Welfare Funds: Provided, such special subcommittees shall submit all testimony, exhibits, and other documents and reports which they might receive to the Subcommittee on Investigation of Welfare Funds. With that preliminary, I think we are now ready to begin our hearings. Mr. Counsel, are you ready to proceed? Mr. MCCABE. Yes, sir. The first witness will be Mr. Hal G. Lutes. (Discussion off the record.) The CHAIRMAN. Back on the record. Raise your right hand. Do you swear to tell the truth, the whole truth, and nothing but the truth, so help you God? Mr. LUTES. I do. TESTIMONY OF HAL G. LUTES, SAN BERNARDINO, CALIF. Mr. MCCABE. Will you state your full name? Mr. LUTES. Hal G. Lutes. Mr. MCCABE. And your full address? Mr. LUTES. 456 19th Street, San Bernardino. Mr. MCCABE. What is your occupation? Mr. LUTES. A restaurant operator. Mr. MCCABE. Have you at any time been a trustee on a welfare fund? Mr. LUTES. Yes, sir. Mr. MCCABE. Would you state the identity of that fund? Mr. LUTES. Well, it is the welfare fund, trust fund, set up by the union. The employers pay in for the benefit of the employee. Mr. MCCABE. Would you identify the union in that case? Mr. LUTES. It is the Culinary and Bartenders Local of San Bernardino. I don't know the number. Mr. MCCABE. Are you now a trustee for that fund? Mr. LUTES. No, sir. Mr. MCCABE. For how long a period were you a trustee? Mr. LUTES. Approximately a year and a half. Mr. MCCABE. When did you terminate your trusteeship? Mr. MCCABE. For what reason, sir? Mr. LUTES. Well, there were several reasons. Mr. LUTES. Well, my personal reasons were more or less personal, nothing to do with the fund at that time. Mr. MCCABE. Would you have any objection to outlining those reasons for the committee, sir? Mr. LUTES. Well, as I said before, they were personal. I thought the union was unfair in their demands. I was on the negotiating committee for their new contract and I thought they were very unfair. That was the reason I resigned from several things, not only as a trustee. Mr. MCCABE. Did you have any disagreement with your fellow trustees? Mr. LUTES. None. In the meetings, yes, but not Mr. MCCABE. I mean in the meetings, any official disagreement over matters of policy or administration? Mr. LUTES. Well, I was on there when the fund was first set up, and you are bound to have disagreements. You can't all see eye to eye. Mr. MCCABE. Did there come a time, Mr. Lutes, when you felt it necessary to object to a proposed appropriation of welfare funds for a purpose that you considered not within the scope of the trust agreement? Mr. LUTES. I did. Mr. MCCABE. Would you explain that to us, sir? Mr. LUTES. Well, there was an operator that was suing the union and the council, and I happened to be president of the council at the time. He did not sue the trust fund. As a trustee, I thought we were in there to administrate this trust fund, and not to spend it to protect us. So I objected. Mr. MCCABE. You say the operator. By that you mean a restaurant operator? Mr. LUTES. Yes, sir. Mr. MCCABE. He had filed suit against, you said, the union and the council. Would you tell the committee just what is the council? Mr. LUTES. Well, the council, you might say, is the same thing as a union. In other words, the operators banded together to have somebody represent us, protect our interests, as well as the union being banded together to protect the employees. The employers did the same thing. That is the council. Mr. MCCABE. In other words, it is an employers' association, dealing with the union? Mr. LUTES. Collectively, rather than having them go around one at a time and sign one contract. Mr. MCCABE. Do I understand you correctly that the trust fund was an entity separate from either the employer association or the union? Mr. LUTES Definitely. Mr. MCCABE. And it is your view that the proposal to appropriate moneys was a proposal to finance a legal defense of the union and the employers' association and not a defense of the trust fund as such? Mr. LUTES. He wasn't suing the trust fund. He was suing the operators and the union. Mr. GRAHAM. How many members were there in that association? Mr. LUTES. At that time, I am not positive, but there were approximately 30. The CHAIRMAN. Would you talk a little louder? I think they are having a little difficulty hearing. Mr. GRAHAM. How many restaurant and hotel employers contributed to the welfare fund, approximately? Mr. LUTES. Well, anyone that had a contract. I don't have those figures. Mr. GRAHAM. To the best of your knowledge, how many contracts were there for contributions into the welfare trust fund? Mr. LUTES. I would have to guess. Mr. GRAHAM. All right." Mr. LUTES. I would guess about 250. Mr. GRAHAM. In other words, the money from the trust funds was allocated to defend the union and a certain group of employers, probably just 20 or 30? Mr. LUTES. I was one of them. Mr. GRAHAM. But the contributions were being paid into that by some 200 employers? Mr. LUTES. Yes, sir. Mr. MCCABE. Would you tell us the exact nature of that proposed appropriation, how the situation came up in your trustees meeting and the nature of your objection to it? Would you go into some detail on that for us, Mr. Lutes? Mr. LUTES. Well, it was proposed-I have to bring in an outside name, our counselor, we call him, Mr. DeNey. He has his office in Los Angeles. Mr. MCCABE. Would you spell that for the reporter? Mr. LUTES. I can't. I think it was held for 2 or 3 meetings due to the fact that I wouldn't go along with the idea. I couldn't see it. It wasn't our money. I even suggested we assess each members in our organization so much, if we needed $500, and let the union put in their share. But I was voted down, and I have it in a matter of record that I was the only dissenting vote that voted against it. It wasn't our money, after it went in there. Mr. MCCABE. And the amount in question was $500? Mr. LUTES. That is right. Mr. GRAHAM. You mentioned before that to the best of your recollection there were some 200 contributing employers. Mr. LUTES. I was strictly guessing. Mr. GRAHAM. Well, 25 or so one way or the other doesn't make much difference. In the trust agreement, was there a provision that barred any but members of your association from becoming trustees? Mr. LUTES. I believe so. Mr. GRAHAM. In other words, even though these hundred-some-odd made contributions into the trust fund, they were barred by the trust agreement from having any voice in the expenditure of the money? Mr. LUTES. That is right. Mr. GRAHAM. Do you recall, as a trustee, in drawing up the contract for insurance or so on, whether more than one broker was consulted? Mr. LUTES. When it got to the meeting, there was only one broker consulted. Prior to that, I don't know. He was brought in by the union, this broker, and whether they did get bids-I think I did hear something of them getting Mr. GRAHAM. He was not brought in by the joint trustees? |