- The Washington Times - Tuesday, January 28, 2003

In the last 18 months the American public has come to understand that fraud in an organization can take many forms. And they have learned from the still-emerging corporate scandals that the best protection against fraud is sunlight. Deceit grows and festers when it can hide in the dark, far away from auditors and public regulators.

Thus, the best way to combat fraud and corruption is through public reporting and audit oversight. Accurate reporting is the key to good corporate governance. On those principles, it would seem everyone agrees speaking of Enron, John Sweeney, president of the AFL-CIO said "transparency, accountability and full and accurate disclosure should be central goals of financial regulation."

Yet in Washington these days, as is so sadly often the case, political considerations substitute for principle. The same virtues of transparency and accountability that allow us to fight corporate fraud would seem to be of value in combating corruption in any other organization with an effect on the public economy. But when the Labor Department recently proposed new reporting forms for labor unions (a proposal that would update old forms first developed in 1959, before Sputnik was launched) they met a firestorm of resistance from labor unions and their political supporters.

The laws requiring reporting by labor unions grew out concerns for the corruption and abuse of powers by union officials. But while the financial world and the nature of potential abuse have changed since the Landrum-Griffin Act was passed in 1959, the original reporting forms developed that year (known as the form LM-2) have not.

Today, the old forms are simply not up to the task. Unions, for example, are permitted to aggregate spending reports under such ambiguous categories as "Grants to and Joint Projects With State and Local Affiliates" (on which one spent $62 million in 2000) or "Other Disbursements" (on which the same union spent $45 million). That kind of aggregate, indefinite information simply is unacceptably vague. Union members cannot really know what union officials are doing with their money and Labor Department regulators cannot fulfill their function as trustees and guardians of the interests of union members. The new forms, which will ask unions to itemize major disbursements of more than $5,000, should give anyone interested in union governance more adequate information.

Why would anyone oppose more transparency in union operations? The unions offer two reasons. First, they say nobody really wants this information that union members are uninterested and its just big government intruding in their inner workings. But the facts belie that claim. Union rank and file are vitally interested in union affairs and are crying out for more information. Since the Labor Department began posting the old-style LM-2s on the web in June 2002, the site has been visited more than 3 million times.

The unions' other response is that the new forms will create a heavy burden on small unions many of whom, they argue, literally keep their financial records in a shoe box. I yield to no one in my opposition to any increased and unnecessary paperwork burden imposed by the federal government. But this union objection is little more than hyperbole. The new LM-2 reporting requirements will apply only to those unions with total receipts of more than $200,000 per year an income that would put an individual taxpayer in the highest and most intrusive tax-reporting bracket. And according to a General Accounting Office study in 2000, only 20 percent of the unions the largest ones with the greatest sophistication fit this category.

Contrast this requirement for a single annual report with the veritable flood of reports now required of corporations and their executives. They file annual reports, quarterly reports and reports of any significant events with the Securities and Exchange Commission. It seems little to ask that unions in the interests of accountability file a single report each year.

Given the facial implausibility of the proffered opposition to the new reporting requirements, one can only speculate as to their true motives. But make no mistake the stakes are high. Unions control more than $400 billion in pension funds. They represent more than 13.5 million members. And in the past five years, more than 640 corrupt union officials have been convicted of various frauds. Courts have ordered union officials to pay more than $15 million in restitution.

But the old forms are almost useless to uncover most corruption. Think of the recent Washington Teachers Union scandal. FBI agents seized mink coats, and Tiffany silver all bought with union money. Not a dime of that spending was reported anywhere on the old LM-2s. The new forms (especially if the threshold for expenditures is lowered to, say, $1,000) will at least give union members a fighting chance to keep their money out of the pockets of union leaders and in their own coffers.

The only reason for John Sweeney to change his tune is that he isn't comfortable reporting the union's activities in the same detail we ask of Enron and Worldcom and that isn't principle, it's politics.

Edwin Meese III, a former U.S. attorney general, is chairman of the Center for Legal and Judicial Studies at the Heritage Foundation.

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