Posts Tagged ‘Organized Crime’

Allegations of Union Corruption in NYC? We’re Shocked… Shocked!

Wednesday, August 5th, 2009

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In a series of predawn raids this morning, the FBI arrested the boss of New York City’s carpenters’ union and nine other men. The 29-count indictment alleges a scam whereby construction contractors paid bribes to union officials, in return for which they were allowed to use cheaper non-union labor. The Genovese crime family is mentioned. (If you’re looking for some light reading, here’s a copy of the 90-page Carpenters Union Indictment.)

Like all federal racketeering indictments, this one looks awful at first glance. It’s 90 freaking pages long! It talks about conspiracies, and schemes, and bribes, and fraud. It says they used code words to conceal the true nature of their actions. Someone said so-and-so would never rat them out, but if he did, “we’d fuckin’ have to kill him.” How in God’s name can one defend a case like that?

Well, it can certainly be done. There are several potential weak spots in any investigation case, which of course law enforcement tries to shore up as best they can. But a good defense attorney knows where the case is likely to be weakest. If there are wiretaps, he knows how to challenge that evidence. (Check out our CLE course on how to do this here.) If there are conclusions, matters of interpretation, he knows how to undercut them. By making the prosecution work harder to prove its case, by finding flaws and weaknesses, he can advocate for better plea bargains and less punishment — or even stand a chance to fight it at trial.

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This is something we actually have some experience with. The last big case like this involved the roofers’ union. We investigated and prosecuted that case, back in the days before we came over to the side of the angels. That investigation involved something like a year and a half of wiretaps on dozens of phones, “debriefings” of too many individuals to count, analyzing a warehouse-full of seized documents, and a six-month grand jury presentation. That’s just the stuff before anyone got arrested. By the time the case was over, we saw the first New York conviction of a labor union, as well as convictions of all the union leadership and the Genovese guys controlling them. So this case sounds pretty familiar.

In a nutshell, what happens is this: Let’s say you’re a contractor doing some work on a project. It’s a union project, which in this part of the world means you can’t put anybody on the job unless they’re a dues-paying member of a labor union. And your company has to be a union shop, complying with the collective-bargaining agreement. (State laws like prevailing-wage laws and the like actually force this kind of situation.) But you don’t like union workers. Their wages are too high. You have to pay more for their union benefits. The union collective-barganing agreements make you use manpower-intensive, inefficient labor techniques (to maximize union revenue). You have to hire more workers than you’d otherwise need, to comply with the union rules. And to top it all off, in your experience, union workers around here just aren’t as competent or skilled as the non-union guys.

So what do you do? You do what your father did, and what his father did. When you get a union job, one of the union officials meets with you, and you give him an envelope of cash. In return, the union looks the other way, and doesn’t enforce its collective-bargaining agreement with you. You get to higher fewer, cheaper and better workers, and you wind up making more profits off the job. The union bosses get extra cash. And the union guys get to sit in the union hall, wondering why there’s no work today.

And if you don’t pay up? Well, it’s no secret that there might be some people who might take it amiss if you did not do so. Everybody knows this, right? Don’t you watch movies? But did anyone actually say that to you… well, no. Did anyone ever actually threaten you? Not exactly. It’s just something you understood.

So maybe you’re a victim of extortion — pay up and make extra profits or else. Or maybe you’re a willing participant — it’s just the way things are done around here, might as well play along.

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Of course, this whole setup is wholly created by the law itself. In states like New York, the law gives huge power to labor unions, compels union work more often than not, and essentially requires union labor in government contracts. And there is no way to opt out. This is not a right-to-work state. And when the law prohibits the economically-rational decision, basic economics dictates that a black market will arise. And so you get a black market in labor.

It’s costly. The law raises the cost of doing business for the law-abiding, while creating profits for those who flout it. Higher costs mean higher prices and rents for the average Joe. And we pay more taxes to cover the expensive investigations, prosecutions and monitoring of those who would take advantage of the distorted incentives.

It’s not surprising that organized crime always seems to be involved. The mantra of organized labor — thou shalt not compete — just happens to be the mantra of organized crime. O.C. types enforce the lack of competition, and resulting extra costs, in return for a piece. And O.C. types are perfectly placed to take advantage of any black market created by foolish government policies.

So if anyone is ultimately to blame here, we’d say it’s the politicians. The idealists who create rules that would only work if the world didn’t happen to work differently. Rules that create incentives for honest people to do the economically-rational thing. Which creates a market for people — union officials who look the other way, others who protect the arrangement — who can fill that rational need. So long as these foolish laws continue to artificially warp the supply and demand curves for labor around here, we’re going to keep seeing these kinds of cases again and again.