Mr. MULHERIN. No, that is restricted to the business done for the teamsters. He holds that as a separate entity. But it does consist of two factors, not only these welfare funds but also commissions on these life insurance policies which are sold to the teamsters. But it is restricted to the welfare fund and that type of insurance. He carries his general insurance business in the name of a corporation, a different corporation.

The CHAIRMAN. These commissions of Mr. Newell, totaled $460,000? Mr. MULHERIN. That is right, approximately.

The CHAIRMAN. Is that his total business?

Mr. MULHERIN. No, that is restricted to the welfare fund business. The CHAIRMAN. Just commissions for handling welfare fund placements, is that it, like insurance placements?

Mr. MULHERIN. That is right. I have tried to restrict my statements to the welfare-fund business except where Mr. McCabe has asked me questions regarding Breel, Inc.

The CHAIRMAN. The net profit, you say, is $330,000, the net commissions?

Mr. MULHERIN. Yes, sir.

The CHAIRMAN. That means $130,000 is charged off to expense, right, of some type?

Mr. MULHERIN. Yes, sir.

The CHAIRMAN. That $130,000 charged off to expense-what does that consist of?

Mr. MULHERIN. Well, it consists of salaries, travel, commissions, stationery, maintenance of an office.

The CHAIRMAN. How large an organization has he?

Mr. MULHERIN. He has in Seattle-and again I don't have the exact figures unless I count them-the welfare business, he has 13 people on the whole of the welfare business. Where these joint councils are located, like in Los Angeles, he has two employees, a secretary and Mr. Tony Bubenas, who represents him here. The same is true in the San Francisco area and Seattle area. He covers 11 western States. These 13 employees consist of those 2 at the strategic points plus his office employees.

The CHAIRMAN. I believe you said that a Samuel Bassett, attorney for the teamsters in Seattle, and La Poma, secretary for one of the teamsters in Seattle, each held a 1212-percent interest as trustee in Newell's business. What would the term trustee mean?

Mr. MULHERIN. I inquired into that trustee, and as Mr. Newell explained to me, they were trustees on behalf of the City of Hope. In other words, any money that was accrued to them was supposed to go into this charitable organization known as the City of Hope, which, as I understand it, is for the benefit of working people generally. I asked for a copy of the trust agreement but haven't been able to get it. I talked to Mr. La Poma telephonically; I didn't have time to really go out and see him, and he said he thought there was a trust agreement, but that Mr. Bassett, who was the attorney would know about it, and that he was merely a nominal figure and would not be able to give me any information.

Mr. HOLT. At this point in the record, I think we ought to insert a clarification of the City of Hope. That is a very worthwhile charitable organization in this area.

Mr. MCCABE. There has been no question raised about its purpose here.

The CHAIRMAN. I noticed you said something about $20,000 a year from a Mr. Brewster to buy race horses.

Mr. MULHERIN. There were two checks so far this year, one for $20,000 and the other for $12,500, withdrawn from Mr. Newell's part of the earnings, the net earnings of the welfare business and given to Breel, Inc. Breel Co., Inc., is a corporation which maintains racing stables, and which takes horses around the country and runs them at various tracks. It is a business.

The CHAIRMAN. A profit organization, would you say?

Mr. MULHERIN. Yes. This $20,000, although payable to Mr. Brewster, is shown on the welfare fund books as a temporary loan to Mr. Brewster. It is shown on Breel, Inc., and so explained by Mr. Newell as being used for the purpose of buying horses. Ultimately, through the books, it was credited to Mr. Newell's account payable. So that the corporation is obligated

The CHAIRMAN. It is not necessarily Mr. Brewster's money, then. It is Mr. Newell making some type of speculation through Mr. Brewster, is that right?

Mr. MULHERIN. If I indicated that I was making a speculation that it was, I tried to make it very clear that it was credited to Mr. Newell as an account payable on the books of Breel Co., Inc., and not to Mr. Brewster, although the checks themselves were payable to Mr. Brew

ster.

The CHAIRMAN. What is Mr. Brewster's regular job? Does he have something to do with horses?

Mr. MULHERIN. Yes. He takes the horses around from place to place. However, his principal job is head of this Western Conference, as Mr. Newell told me, these 11 Western States in which he does business for the teamsters union. He is Mr. Beck's assistant as vice president. I understood that from Mr. Newell.

The CHAIRMAN. Who owns the horse-racing business, or raises horses, or whatever it is? Who owns that?

Mr. MULHERIN. Mr. Brewster and Mr. Newell. They each own 50 percent of the stock.

The CHAIRMAN. Where is that located?

Mr. MULHERIN. The office is located in the State of Washington. It is a Washington corporation. However, they do bring their horses down here to Santa Anita, Hollywood Park, and on

The CHAIRMAN. Just a moment. Mr. Mulherin, was Mr. Brewster in any way tied up with Mr. Newell in connection with insurance, commissions, or anything of that sort?

Mr. MULHERIN. Except insofar as this money is shown by Mr. Newell in his tax return which he showed me as coming from this wel fare business, consisting of these two elements: One, welfare fund, and the other the teamsters insurance business, not his general busi ness. There is a schedule attached to his return indicating that this payment to Mr. Brewster was in connection with that business, although Mr. Newell said to me it really wasn't for that, that maybe his accountant made a mistake. It was because Mr. Brewster was in good physical health, and would get up at 4 o'clock in the morning and go out and take care of the race horses, whereas he couldn't do that. And he felt Mr. Brewster was entitled to something a little over and above what he himself would get out of Breel.

The CHAIRMAN. I can understand payment for services in connection with the payment and raising of horses. I can understand that. But what has that to do with money for insurance?

Mr. MULHERIN. The difficulty is this: From allocating it, I have Mr. Newell's statement on one hand that it came from the racing business, and the tax statement on the other hand indicating that it came from the welfare business. That is my problem.

The CHAIRMAN. I have no further questions at the moment.
Mr. Holt?

Mr. HOLT. I have no questions.
The CHAIRMAN. Mr. Lucas?

Mr. LUCAS. I have no questions.
The CHAIRMAN.. Mr. Miller?

Mr. MILLER. There are a lot of questions in my mind, but I do not know how to bring them out. I am not clear on all of these figures. The CHAIRMAN. Mr. Counsel, I am not clear on all of these figures, either. Have you some other data there that can help us develop it? It has just been thrown at us, you might say, in one fell swoop and it is a little hard to break down. We do not want to do any injustice but at the same time we want to put blame where it belongs if there is blame. Can we develop this?

Mr. MCCABE. Just a moment, Mr. Chairman. Mr. Bellino, you are an accountant and a trained CPA. Would you help us develop these figures a little more?

Mr. BELLINO. Yes, sir. Mr. Mulherin, did this investigation disclose any fees or moneys paid by Mr. Newell to Mr. Brewster in the year 1951?

Mr. MULHERIN. It shows that from the Union Group Insurance Agency, Seattle, Wash., for that year, Geraldine and George Newell, received a total of $69,710.46. The Union Group Insurance Agency, Seattle, I know, from both talking to Mr. Newell and examining the records, is this particular entity, this partnership, at that time of Mr. Morganstern and of Mr. Newell, for the sole purpose of operating this union insurance business, this union welfare fund. From that he received $69,710.46. There is only one deduction for that, that being a net figure to start with, and that is commission expense paid to Frank Brewster in the amount of $5,150, leaving a net to Geraldine and George Newell from that particular business of $64,550.46.

In other words, it is tied in very directly with this union business. The CHAIRMAN. That is as a commission?

Mr. MULHERIN. As a commission.

Mr. BELLINO. Mr. Mulherin, in 1952 George C. and Geraldine Newell had partnership income from the Union Group Insurance Agency, Seattle, $38,609.95, less commission expense paid to Frank Brewster, Seattle, $5,360. Net: $33,249.95. Would this situation be identical with the 1951 matter?

Mr. MULHERIN. This, again, shows as I have just indicated in 1951, that from this Union Group Insurance Agency, Seattle, Wash., a net of $38,609.95 was received, from which a commission expense was paid to Frank Brewster of $5,360, leaving a net of $33,249.95, from that particular business.

53814-54-pt. 1——21

Mr. BELLINO. Mr. Mulherin, will you tell the committee whether investigation showed if Mr. Brewster received the same amounts as income.

Mr. MULHERIN. It was treated as income. I would have to have the documents before me before I would want to hazard a statement. Mr. BELLINO. Can you tell us your best recollection. The memoranda are upstairs, but you can tell from your best recollection what they disclose?

Mr. MULHERIN. As I recall it, outside of being identical in amount, in all amounts for each year, there was no indication tying it in directly with this business.

The CHAIRMAN. We will proceed with the next witness. You may remain, Mr. Mulherin, if we need you.

The next witness is Mr. Charles O. Cross, administrator of welfare funds for the teamsters.

Give your full name and then raise your right hand.

Mr. CROSS. Charles O. Cross.

The CHAIRMAN. Do you solemnly swear to tell the truth, the whole truth, and nothing but the truth, so help you God?

Mr. CROSS. I do.

TESTIMONY OF CHARLES 0. CROSS, STATISTICIAN FOR THE JOINT COUNCIL OF TEAMSTERS, ACCOMPANIED BY JOHN C. STEVENSON, ATTORNEY FOR THE TEAMSTERS UNION, LOS ANGELES, CALIF.

The CHAIRMAN. With you is your attorney?

Mr. STEVENSON. John C. Stevenson, attorney for the teamsters. Mr. BELLINO. Mr. Cross, will you state your full name and occupation?

Mr. CROSS. Charles O. Cross, statistician for the Joint Council of Teamsters, Los Angeles.

Mr. BELLINO. Prior to becoming statistician, what was your employment?

Mr. STEVENSON. May I interrupt at this time? I was told, Mr. McConnell, we could place a statement in the record. Should we do that before the examination?

The CHAIRMAN. We will conclude with the examination first.

Mr. CROSS. Just prior to my employment with the teamsters or how far back?

Mr. BELLINO. Just prior to your employment with the teamsters. Mr. CROSS. Prior to my employment with the teamsters, I was in the Navy.

Mr. BELLINO. Were you at any time in the Department of Labor? Mr. CROSS. Yes, sir.

Mr. BELLINO. The welfare fund office is located at 846 South Beacon Street in Los Angeles and occupies a building owned by the subsidiary of the teamsters union, is that correct?

Mr. CROSS. The building is owned by a corporation. I don't know whether you would call it a subsidiary of the teamsters. It is owned by a corporation.

Mr. BELLINO. What is the amount of rent which the welfare office pays?

Mr. CROSS. I believe the present rent is $1,100 a month.

Mr. BELLINO. Does the teamsters union receive anything for your services from the welfare fund?

Mr. CROSS. Yes, sir. They receive a sum of $800 a month.

I would like to make a statement in connection with that.
Mr. BELLINO. You may.

Mr. CROSS. When the welfare plans were first set up, I was named the administrator, and for the first, I believe, almost 2 years of the operation of the welfare plan I, as administrator, drew no salary, I draw no salary, my salary or expenses are not paid by the welfare plan. My services as administrator were donated free by the teamsters union for the first couple of years of operation.

We were attempting to operate our welfare plans under an administrative allowance of 4 percent. As the operation grew, more and more of my time was taken up with the administration, to the point where 95 percent of my time is spent as administrator.

About 2 years ago it seemed only fair to me that if 95 percent of my time were spent as administrator I should be paid for it. The question was whether I should transfer my employment from the teamsters as a paid administrator or not. I did not wish to transfer my employment. I receive certain retirement benefits as an employee of the teamsters.

So I approached the trustees of the various funds with the problem and suggested that my employer be permitted to bill the welfare fund some nominal amount for my services. The trustees approved that action.

Mr. BELLINO. Mr. Cross, would you state how it came about that statisticians of the teamsters, like yourself, are made administrators in the teamsters' welfare plans?

Mr. CROSS. Yes. When the first welfare plan was set up in southern California, it was negotiated with the employers, members of the Motor Truck Association of Southern California. When the fund was set up, the employers had no one to suggest as administrator. The unions wanted to remain as close to the administration as possible, and at the union's suggestion, and with the approval of the employer trustees, I was made the administrator.

Mr. BELLINO. Would you also advise on the manner of payments which are made by the contributors, how they are based and what the rate is?

Mr. CROSS. Do you mean the employer contributors?
Mr. BELLINO. The employer contributors, yes, sir.

Mr. CROSS. Of course, you have heard testimony here that we have 13 different trusts. The method of payment by the employers under those 13 different trusts vary. For the most part, however, it is a straight monthly contribution in amounts ranging from the lowest, I believe, of $4.30 per month per employee to the highest which I believe is $11.60 per month per employee.

Mr. BELLINO. Is that based upon the contributions that are submitted by the contributing shops and the employer decides who should be included in the insurance benefit plans and makes contributions accordingly? In other words, does he have to include every teamster employee from the very first day he is working for him or can he wait, let us say, 6 months and then begin to include him on the insurance plan and pay for his contribution?