INVESTIGATION OF WELFARE AND PENSION FUNDS (LOS ANGELES AREA) THURSDAY, SEPTEMBER 23, 1954 HOUSE OF REPRESENTATIVES, SPECIAL SUBCOMMITTEE OF INVESTIGATION OF WELFARE AND PENSION FUNDS, The committee met, pursuant to recess, at 10 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. Mr. Ely, will you stand and raise your right hand? You do solemnly swear to tell the truth, the whole truth, and nothing but the truth, so help you God? Mr. ELY. I do. TESTIMONY OF HENRY B. ELY, ATTORNEY, LOS ANGELES, CALIF. The CHAIRMAN. Mr. Derrickson, I believe you are to question. Mr. ELY. Mr. Chairman, may the record show that I am under subpena here? The CHAIRMAN. The record will so show, that you are under subpena. Mr. DERRICKSON. Mr. Ely, will you state your full name for the record? Mr. ELY. Henry Bidwell Ely. Mr. DERRICKSON. Will you give your full address? Mr. ELY. My office address is 453 South Spring Street, Los Angeles, Calif. Mr. DERRICKSON. Will you explain your connection with the sheetmetal workers welfare fund? Mr. ELY. Yes. I have had a relation to it ever since its inception, which was under contract by October of 1950. I represented a portion of the sheetmetal industry, contractors engaged in installation of residental heating. And in that capacity I attended all the meetings of the welfare fund up until the fall of 1952. At that time I was appointed to the position of executive secretary of the Sheetmetal Contractors Association of Southern California, and I became a trustee late in 1952. Beginning in September of 1953 and to date I have been cochairman for management of the fund. Mr. DERRICKSON. Thank you. Will you explain to the committee how the employer trustees were selected for the fund? Mr. ELY. Insofar as the Heating Industry Council was concerned, at that time we had a meeting and elected two trustees on the fund. The Heating Industry Council negotiates the agreement with local 108, the sheetmeal workers, in this area, for as I say, warm-air residential heating. I was not present when the sheetmetal contractors trustees were first elected. Mr. DERRICKSON. They were elected? Mr. ELY. I am not positive of that. I don't know whether they were elected or appointed by the board of directors of the contractors' association. Mr. DERRICKSON. Do you know how the employee trustees were selected? Mr. ELY. Well, of course, anything I say is secondary knowledge, but as I understand it, they appointed a temporary committee, the union did, by local 108, in the fall of 1950. I believe it was probably appointed by their executive board, I am not sure, and they held office as temporary trustees. Then, after that, permanent union trustees were elected by the union. Mr. DERRICKSON. Mr. Ely, when was this fund started? Mr. ELY. Effective date for the computation of payments to the fund was December 1, 1950. First payments were due January 10, 1951. Mr. DERRICKSON. At the time the fund was set up, Mr. Ely, how was the broker in this case selected to handle the insurance aspects of it? Mr. ELY. The broker was selected by the union; by the union representatives. Mr. DERRICKSON. What part did the employer trustees play in it at all, if any? Mr. ELY. The employer trustees agreed to what the union wanted. Mr. ELY. A man by the name of Jordan Jones in Sacramento. Mr. ELY. No, sir. Mr. DERRICKSON. Was there any question raised by the emplover trustees as to how this broker would be selected after the union representatives, as you say, proposed him? Was there any discussion of why he was selected? Mr. ELY. No. We did know, though, that he was also the broker for the sheetmetal welfare fund of Northern California, which agreed to a welfare fund a couple of months before we agreed to one. Mr. DERRICKSON. Was it your understanding that when you selected that broker, that the insurance would be placed with a certain insurance company, or was it your opinion that the broker might place it with the company that offered the best contract to the fund? Mr. ELY. I want to say this, that the employer trustees had no part in the selection of the carrier. The union announced to the employer trustees who the carrier would be. I had talked with a number of carriers, Aetna, John Hancock, prior to this matter coming up. I wanted bids to be let, a request for bids to be made by the trustees to all or to 10 or 12 leading insurance companies. I was not successful in getting the trustees to adopt that. Mr. DERRICKSON. Are you saying that the trustees did not give any consideration to bids offered by other companies? Mr. ELY. I say that the trustees, and you are talking now about the joint labor-management trustees Mr. DERRICKSON. That is right. Mr. ELY. Gave no consideration to a choice between various carriers. Mr. DERRICKSON. There was no discussion of offers made by any other companies? Mr. ELY. Not by the joint trustees. Mr. DERRICKSON. Was there by the employer trustees? Mr. ELY. Not by the employer trustees. Mr. DERRICKSON. It was just accepted on the basis of a proposal made by the employer trustees? Mr. ELY. Yes. The employee trustees advised us that they had selected the carrier. Mr. DERRICKSON. Were you satisfied to accept that? Rather, you were not a trustee at that time; is that right? Mr. ELY. No. I was very unhappy, personally. Mr. DERRICKSON. Were the other employers happy or did they indicate any question to you as their attorney? Mr. ĚLY. I would like to answer that by making a statement. We negotiated with local 108 and the international representative, Thomas B. Hanley, in the fall of 1950. The employers, rather than to have a welfare fund, offered more money to the union. I thnk it was 3 or 5 cents. The union refused that, took a strike vote, and threatened to shut down the industry. The employers, on the basis of that threat, agreed to be joint trustees of this fund. Mr. GRAHAM. Mr. Ely, excuse me. Do you mean that the employers offered to give the employees more money in wages? Mr. ELY. That is right; over and above the-the original welfarefund payment, I believe, was 62 cents an hour, and they offered, I think, 9 or 10 cents, or maybe a little more-I forget the exact amount-over and above or instead of the 612 cents. Mr. GRAHAM. In other words, they offered the individual employee an increase in pay of 912 cents an hour, but they turned it down for a 612 cents an hour welfare-fund payment? Mr. ELY. That is correct. Mr. GRAHAM. Thank you. Mr. DERRICKSON. Mr. Ely, as the attorney at that time to the council and to the trustees, did you advise them to accept the employee trustees proposal for this broker and this insurance company, or did you advise against it, or did you give any advice with respect to the selection of the broker and the insurance carrier? Mr. ELY. I was attorney for just 2 of the 6 employer trustees at that time, and we were in a minority. We all agreed, we thought bids should be requested, jointly by the trustees. That was the end of that. A Mr. DERRICKSON. Mr. Ely, how is the administrator of this fund appointed or selected? 53814-54-pt. 1——7 Mr. ELY. Well, the first fight we had was who is going to be administrator of the fund. The union advised us that the insurance carrier had been selected, they advised us that a broker had been selected. And then who was going to manage this money. We figured it would amount to four or five hundred thousand dollars a year. The management trustees were of the opinion that somebody competent in the sense of having office experience, insurance experience, experience with bookkeeping machines, some of that type of experience, should be the proper person. The union wanted. to have a union management. Their argument was that only a union man could treat fellow union men properly in applying for claims. So the joint trustees agreed on a compromise. We would have a union man to look over the claims, and somebody with bookkeeping experience, accounting experience, office management, to handle the rest of the administration. The trustees agreed on that, and then at the next meeting of the trustees C. C. Artman, business manager of local 108 at the time, he said that his superior, Thomas B. Hanley, international representative for the sheetmetal workers, had vetoed that deal. It was going to be a union man in charge of the whole office. The meeting broke up at that, at a loggerhead. Mr. GRAHAM. What capacity did Mr. Hanley have that he was advising on that? Mr. ELY. Mr. Hanley was international representative covering California, Nevada, and Arizona. He spoke with a weight of a representative of the international union. Mr. DERRICKSON. So what happened at the next meeting? What happened as a result of that? Mr. ELY. We were having trouble getting copies of the minutes. I never did get a copy of the minutes of that next meeting. The union secretary, Clair Croudy, was taking the minutes in sort of a casual manner. I have not in my record just the date of the meeting, but I know that we had a meeting. A man by the name of Fred McCormick, who was a sheetmetal worker, and who had serious heart trouble and who couldn't work at the trade, was the man the union recommended to be administrator of this fund, and that was accepted by the trustees. Now, he was to be a temporary administrator, until we could finally get together on the matter and iron it out. He was a temporary administrator from January 1951, until December 1952. Mr. DERRICKSON. What was his salary, Mr. Ely? Mr. ELY. His salary was always at the going rate of assistant business representative of local 108. Mr. DERRICKSON. Do you recall what that was? Mr. ELY. Well, the assistant business representatives always got an increase when the employees got an increase, so it was there then about $125 a week. Mr. DERRICKSON. Was he allowed any expenses? What was the arrangement as to his expenses? Mr. ELY. It is my best recollection, with Fred McCormick he did. not get expenses. But I could be wrong on that. Mr. DERRICKSON. When he went out of office, who took over? Who became the administrator and how? |