Former Treasurer of Amtrak Police Union Arrested, Charged


The union representing security employees of Amtrak, the nation’s federally-chartered rail passenger corporation, was missing funds. It didn’t have far to look for the source of the problem. On June 24, Eric Givens, a longtime Amtrak police officer, was charged in U.S. District Court for the Southern District of New York with one count each of wire fraud, embezzlement and making a false statement related to his alleged theft of at least $100,000 in funds from the Amtrak Police Labor Committee, and a Fraternal Order of Police affiliate, each of which he had served as treasurer. He had been arrested earlier that day. The actions follow an investigation by the Labor Department’s Office of Labor-Management Standards and Office of Inspector General, and the Amtrak Police Department’s Office of Internal Affairs.

Eric Givens had been a police officer with National Railroad Passenger Corporation, or Amtrak, since May 1997. In addition, he was treasurer of Amtrak Police Labor Committee during 2003-10, and for three years after that, a committee affiliate known as Fraternal Order of Police Lodge 189. According to prosecutors, Givens, 52, a resident of East Stroudsburg, Pa., starting around 2008 helped himself to the union till. He allegedly made unauthorized debit card charges and cash withdrawals from the Labor Committee and Lodge, and then concealed these transactions in union financial records. The funds went for personal expenses such as food, gasoline, travel and entertainment. Eventually, the union leadership recognized it was missing funds and called upon the U.S. Labor Department to conduct an investigation.

Court Forces Government to Release Documents in Fannie/Freddie Suit


The burden carried by the holders of stock in mortgage giants Fannie Mae and Freddie Mac, each operating for nearly six years under federal conservatorship, just got lighter. On July 16, U.S. Court of Federal Claims Judge Margaret Sweeney, in a procedural ruling, held that shareholder-plaintiffs in Fairholme Funds Inc. et al. v. United States are entitled to know material facts that the government wants to keep secret. The shareholders are seeking compensation for foregone income resulting from the Treasury Department’s “sweep” rule of August 2012, which forced the companies to forward all dividends to the department in perpetuity. Government lawyers had filed a motion for a protective order on May 30 to inhibit discovery. The outcome of this case will have major implications for the future of property rights in this country.

National Legal and Policy Center has been following the situation at the Washington, D.C.-based Federal National Mortgage Association (“Fannie Mae”) and the McLean, Va.-based Federal Home Loan Mortgage Corporation (“Freddie Mac”) following the federal takeover of the two publicly-traded companies in September 2008. The nation’s financial services industry at the time was in free fall. House prices were plummeting. Defaults and foreclosures were on the rise. And Fannie Mae and Freddie Mac, which now guarantee or hold a combined $5 trillion in U.S. residential mortgages – almost half of outstanding loan volume – had become dangerously undercapitalized. There was a real danger that the holders of their bonds, known as mortgage-backed securities, would not be repaid. An independent federal regulatory agency created by Congress that summer, the Federal Housing Finance Agency (FHFA), used its authority several weeks later to seize the companies and place them under conservatorship. Conservatorship was intended as a temporary measure. The purpose was to keep Fannie and Freddie, as “Government-Sponsored Enterprises,” solvent, thus ensuring timely payments to bond investors. The arrangement was not permanent.

Over the next few years, the Treasury Department provided the companies with a combined $187.5 billion in loans. The money came out of government-held senior preferred stock representing 79.9 percent of shareholder equity. This bailout came attached with some heavy strings. Most significant was a requirement that Fannie Mae and Freddie Mac had to forward 10 percent of their accrued dividends to the Treasury Department. As their share prices were depressed at the level of penny stocks, their earnings depended on dividends. But during 2011-12, the housing market, unexpectedly and for various reasons, made a comeback. The Treasury Department, seeing an opportunity to speed up debt collection, developed the “third” or “sweep” rule. Issued on August 7, 2012, it would supersede the 10 percent rule. It effectively barred shareholders from realizing any profits on current or future earnings. In the department’s own words, the sweep refers to “every dollar of profit that each firm earns going forward.” Investors were righteously angry. And given that hedge funds and other financial intermediaries held much of their stock, a spate of lawsuits seemed inevitable. Over the course of 2013, they materialized. One of the most publicized of these suits was filed by the New York-based equity fund, Fairholme Capital Management. The action sought to rescind the sweep amendment and to compensate shareholders. This case eventually incorporated similar ones.

On merit alone, Fairholme and co-plaintiffs have a very strong case, especially at this point in time. During Second Quarter 2014, Fannie Mae and Freddie Mac already had sent more than $200 billion in profits to Treasury, a total that was set to rise to $213.1 billion by the quarter’s end – about $25 billion more than what the government had loaned them. To retain the rule would appear in direct contravention with the very purpose of the FHFA conservatorship. Forcibly diverting company profits to the government in perpetuity, argued the plaintiffs, was the antithesis of the intent of the Housing and Economic Recovery Act of 2008 (HERA), which authorized the conservatorship as a temporary measure. Indeed, this was little short of de facto nationalization. The Treasury Department has countered that the plaintiffs have failed to make a convincing case for a regulatory taking.

But there is a reason why the plaintiffs have had difficulties on this score: lack of access to information. The government over the years has kept secret its decisions regarding Fannie Mae and Freddie Mac. And when details of that decision-making are made publicly available, they validate suspicions that the Treasury Department has never had any intention of abiding by the terms of the conservatorship. In late 2013, a New York hedge fund, Perry Capital, filed a separate suit to rescind the sweep rule. Unlike Fairholme, the plaintiffs in that case are not seeking financial compensation. Representing Perry Capital, the Washington law firm of Gibson, Dunn & Crutcher somehow managed to acquire a Treasury Department internal memo, dated December 20, 2010 (see pdf), sent by Undersecretary Jeffrey Goldstein to Secretary Timothy Geithner. In discussing Fannie Mae and Freddie Mac, the memo referred to “the administration’s commitment to ensure existing common equity holders will not have access to any positive earnings from the G.S.E.’s in the future.” In no way did the Treasury Department notify shareholders of this policy change. Had it done so, it is highly unlikely anyone would have continued to hold stock in these companies.
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Steelworkers President in South Carolina Charged with Theft


On May 14, Timothy Gamble, former president of United Steelworkers Local 378, was charged in U.S. District Court for the District of South Carolina with embezzling $9,345 in funds from the Aynor (near Myrtle Beach) union during May 2010-May 2013. The charge follows an investigation by the U.S. Labor Department’s Office of Labor-Management Standards.

Former Letter Carriers Boss in Kentucky Indicted

letters carriers

On June 13, David Lynch, former president and treasurer of National Association of Letter Carriers Branch 383, was indicted in the McCracken County, Kentucky Circuit Court for theft of more than $10,000 in funds from the Paducah-based union. The indictment follows an investigation by the Labor Department’s Office of Labor-Management Standards.

Former Secretary-Treasurer of Denver-Area Government Employees Union Indicted


On June 3, Aide Spade, former secretary-treasurer of American Federation of Government Employees Local 709, was indicted in U.S. District Court for the District of Colorado on four counts of concealing union disbursements to her. The Littleton-based union represents employees of the Colorado state prison system. The indictment comes six years after an audit by the Labor Department’s Office of Labor-Management Standards (see pdf) showed a lack of documentation by Spade of credit card and other supposedly union-related expenses.

Individual Sentenced for Theft from Washington, D.C. MEBA Affiliate


On June 22, Dianna Woodall was sentenced in U.S. District Court for the District of Columbia to three years of supervised probation and 100 hours of community service for participating in a scheme to cash a $9,836 counterfeit check drawn on a bank account of Marine Engineers Beneficial Association (MEBA) District 1, based in Washington, D.C. She also was ordered to pay full restitution. Woodall had pleaded guilty in March after being charged earlier than month. Another individual, Kenneth Marshall Jr., also had pleaded guilty in March to cashing two counterfeit checks totaling $18,851 drawn on that MEBA account. A union spokesman informed NLPC at the time that neither was a union member. The sentencing of Woodall follows a joint probe by the FBI and the U.S. Labor Department’s Office of Labor-Management Standards and Office of Inspector General.

New Book Exposes Attorney General Holder’s Abuses of Power

Obamas Enforcer

Should perpetuating racial grievance be the defining mission of a U.S. Attorney General? Eric Holder, who has held the office for the past five and a half years, really believes it is – and acts accordingly. A new book, Obama’s Enforcer: Eric Holder’s Justice Department (Broadside), presents a strong case for removing Holder from office as a corrective to his many abuses of power related to racial and other issues.

In 256 pages, authors John Fund and Hans von Spakovsky pull no punches in revealing how Holder and other department officials routinely have subordinated rule of law to radical politics, all the while stonewalling Congress and punishing internal dissenters. They also, properly, point a finger at Holder’s boss, President Obama.

There is an old saying in the world of bureaucracy: “Personnel is policy.” This is certainly true of the U.S. Department of Justice (DOJ), a $27 billion cabinet-level agency with about 114,000 employees. Arguably more than any other federal official, the attorney general (AG) carries out the president’s agenda. Fund, a widely-read columnist who wrote for many years for the Wall Street Journal, and Spakovsky, a Heritage Foundation senior fellow who served under George W. Bush as a counsel to the Justice Department’s Civil Rights Division and as a member of the Federal Election Commission, convey as much. The AG establishes an administration’s enforcement priorities and watches the president’s political backside. Though a political appointee, he must be thoroughly impartial. The authors explain (p. 19):

Why does it matter who runs the U.S. Justice Department? Because that person heads one of the most powerful executive branch agencies in the federal government – one that has enormous discretionary power to pursue people accused of breaking law and to exert major influence over social, economic, and national security policies by the choices its leader makes in enforcement. It requires someone who understands that while the attorney general is a political appointee, he (or she) has a sworn duty to uphold the Constitution and enforce the law in an objective, nonpolitical manner.

In other words, to truly understand how President Obama means to transform this country – his mission is far from accomplished – it is necessary to know who Eric Holder is.
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Washington, D.C.-Area Police, Security Union Boss Pleads Guilty to Theft

handcuff money

As a retired cop, J.C. Stamps was about the last person one would suspect of stealing funds. But he indeed had stolen – and from more than one organization.

On June 23, Stamps, a retired detective from the Washington, D.C. Metropolitan Police Department and the founder of two separate unions and a security firm, pleaded guilty in U.S. District Court for the District of Columbia to embezzling nearly $200,000 over a roughly four-year period from the unions. The guilty plea follows a joint probe by the U.S. Labor Department’s Office of Labor-Management Standards, Office of Inspector General and Employee Benefits Security Administration.

J.C. Stamps was very active in the security field. He had been a detective with the Washington, D.C. Metropolitan Police Department. He founded two Washington-based labor unions, the National Union of Law Enforcement Associations (which represented police officers) and the National Union of Protective Services Associations (which represented private security guards). In addition, he had founded a security firm, Stamps Associates, also based in Washington. Unfortunately, he used his positions as a license to steal.

According to court documents, Stamps, 67, a resident of Upper Marlboro, Md., stole a combined more than $190,000 from the unions and the National Union of Protective Services Associations’ Employers Health and Welfare Fund during 2004-08. This included: 1) $48,541 in Health and Welfare Fund American Express card charges for personal items such as hotel stays and clothing; 2) a withdrawal of $36,203 from the fund to pay for legal expenses unrelated to union business; and 3) embezzlement of a combined $109,866 from the two unions. Of that latter sum, over half went to cover debts of Stamps Associates. Much of the remainder went for unauthorized expenses and fraudulent salary payments to a friend, indicated in court documents as “Person A,” the nominal owner of Stamps Associates. As part of his plea, Stamps has agreed to pay $194,611 in restitution and forfeit another $84,745 in funds. Sentencing is scheduled for September 17.

Officers of Cleveland-Area Firm Sentenced for NBA Players Union Fraud, Cover-Up

NBA players
(USA Today)

Joseph Lombardo may not have stolen funds, but it was the attempt that counted. Last Tuesday, June 10, Lombardo, founder and managing director of the Independence, Ohio-based Prim Capital Corp., was sentenced in Manhattan federal court to 18 months in prison for forging signatures in an attempt to renew a multi-year benefits management contract with the National Basketball Players Association (NBPA) worth more than $3 million. Almost three weeks earlier, on May 21, chief compliance officer for the firm, Carolyn Kaufman, was sentenced to six months of home confinement, three years of probation, and 500 hours of community service, and fined $25,000, for helping to conceal the fraud. Lombardo pled guilty in November; Kaufman had been found guilty last December following a trial. The actions follow probes by the Labor Department and the Justice Department.

Union Corruption Update has reported on this case a number of times. About three years ago, Lombardo, founder and managing director of Prim Capital, found himself drawn into a bitter rift between his friend, NBPA Executive Director Billy Hunter, and then-association president and star point guard Derek Fisher. Fearful the players union would not renew its servicing contract with Prim, Lombardo rubber-stamped the signatures of deceased NBPA General Counsel Gary Hall and another union employee to create the appearance of a renewal. The contract would have been good for five years at $602,000 a year.

Fisher and his allies, meanwhile, had hired a New York law firm to conduct a full audit on mismanagement under Hunter. That triggered an investigation by the Labor Department and eventually the Justice Department. Though Kaufman testified before a grand jury that neither she nor Lombardo had forged any signatures, Lombardo, unaware he was being secretly taped, could be heard coaching Kaufman how to avoid questions on the subject. Each eventually was arrested and indicted in the spring of 2013.

Former LIUNA Local Employee in Nevada Sentenced for Embezzlement


If Las Vegas is the place to get lucky, then Aurora Rios hit the jackpot – sort of. On June 9, Rios, ex-office cashier for Laborers International Union of North America Local 872, was sentenced in U.S. District Court for the District of Nevada to 18 months in prison, six months of home confinement, and three years of supervised release for embezzling funds from the Las Vegas union. Though ordered to pay $11,500 in restitution and $2,175 in fines, she could have owed a lot more. Rios had been charged in April 2010 with 21 counts of embezzling $167,500 and three counts of falsifying union records.

She pleaded guilty in April 2012. Rios was one of three persons charged in the case; the two others, Stacy Johnson and Aundrea Valerio, also pleaded guilty. The total theft, originally reported at $225,000, later was estimated at $320,000. The actions follow a probe by the U.S. Labor Department’s Office of Labor-Management Standards.