11.18.2013 Court Conference

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1 UNITED STATES DISTRICT COURT

1 SOUTHERN DISTRICT OF NEW YORK

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3 UNITED STATES,3

4 Petitioner, New York, N.Y.

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5 v. 90 CV 5722

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6 DISTRICT COUNCIL, et al,

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7 Respondents.

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9 November 18, 2013

9 11:00 a.m.10

10 Before:

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11 HON. RICHARD M. BERMAN,

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12 District Judge

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13 APPEARANCES

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14 PREET BHARARA

15 United States Attorney for the

15 Southern District of New York

16 BY: TARA LaMORTE16 Assistant United States Attorney

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17 DENNIS M. WALSH

18 Review Officer

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19 MINTZ LEVIN, COHN, FERRIS, GLOVSKY AND PEPEO

19 Attorney for Petitioner

20 BY: BRIDGET ROHDE

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21 SPIVAK LIIPTON

22 Attorneys for Respondent DISTRICT COUNCIL

22 BY: JAMES M. MURPHY

2323 ZUCKERMAN SPAEDER

24 Attorneys for Respondent NYC DISTRICT COUNCIL OF

24 CARPENTERS

25 BY: BARBARA JONES

SOUTHERN DISTRICT REPORTERS, P.C.

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2 KAUFF McGUIRE AND MARGOLIS

2 Attorneys for Petitioner DISTRICT COUNCIL BENEFITS FUNDS

3 BY: RAYMOND McGUIRE

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1 (Case called)

2 THE COURT: We have a couple of items that I was

3 hoping we would talk about today. One is we were going to hear

4 a report on how the funds are doing. Mr. McGuire, we have Ryk

5 Tierney who is here.6 MR. McGUIRE: Yes. Mr. Tierney is here and ready to

7 report.

8 THE COURT: Mr. Tierney, you are welcome to be at

9 counsel table. That's one issue.

10 I see late Friday the fifth 30-day report was filed,

11 which seems to have some issues in it. Relatedly, we want to

12 hear about the implementation of these new technology methods

13 that have been included in the last four or five collective

14 bargaining agreements, and to hear what they are. Last time we

15 were here, I thought that Mr. Walsh indicated that there was

16 some issues with the implementation, and there appears still to

17 be based on the fifth report.

18 Then relatedly, latest is the new technology committee19 that has been formed at the District Council. We will hear how

20 that fits in as well.

21 I'm always concerned about the financial status of the

22 funds. We could start with that and hear how they are doing.

23 One issue in your conversation that would be helpful

24 for you to cover, and I don't remember if it's true of these

25 funds, but sometimes pension and benefit funds include what


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1 turn out to be, or have historically turned out to be,

2 unrealistic expectations of return. Then when it's time to

3 retrieve some of the benefits from the funds, they fall short

4 because of those expectations. I'm not sure if that's true in

5 the case of these funds.6 Mr. Tierney.

7 MR. TIERNEY: Thank you. My name is Ryk Tierney. I

8 am the Executive Director of the New York City Carpenters

9 Benefit Funds. For the record, we handle the four major funds

10 for the carpenter benefits, which are the pension fund; the

11 welfare fund, which includes vacation and scholarship benefits;

12 the annuity fund; and then the apprenticeship journeyman

13 retraining, education and industry fund.

14 I will start with the pension fund, an update on total

15 assets as of September 30, 2013.

16 THE COURT: Is that the order in how big they are?

17 MR. TIERNEY: In order of how big they are, the

18 pension fund is the largest, so yes. Then I will talk about19 the welfare fund. Annuity is the second largest. And the

20 apprenticeship is small.

21 The pension fund, as of September 30, 2013, has

22 approximately 2.46 billion dollars in assets. Our one year

23 rate of return, including the property at 395 Hudson is 16.12

24 percent, and that actually exceeds our policy index return of

25 13.35. So actually the numbers this past year, reflective of


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1 the market, have actually been very good.

2 THE COURT: That's the calendar year.

3 MR. TIERNEY: This is actually the last one year. So

4 October 1, 2013 to September 30, 2013.

5 To take a little longer historical look, our five-year6 return is 6.40 compared to our policy index of 5.89. And our

7 ten-year number is 7.85 compared to our policy index return of

8 6.48.

9 I think in reference to the question you asked earlier

10 about long-term assumptions, the actuarial assumed rate of

11 return is what we base those projections on for long term and

12 what we expect to get. Some funds run an actuarial rate of

13 return somewhere in the seven to seven-and-a-half percent

14 range, and as you can see, our tenure number of 7.85. So it's

15 been good and the numbers are reflective of that.

16 I think a key way to judge that is to look at our

17 funded status under the Pension Protection Act of 2006. The

18 fund is considered to be in the green zone, which means that it19 is better than 80 percent funded and is not projected to have a

20 funding deficiency with any of the upcoming six years.

21 Actually, this number has been getting better year over year.

22 In 2009, our funded percentage was 81.9. 2010, it was 81.9.

23 2011, it was up to 84.8. The prior year it was 86.4. And as

24 of July 1, 2013, our funded percentage is 89.4. It's

25 continuing to move in the right direction. The participants


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1 are made aware of this fund percentage based on a document

2 called the annual funding notice. It's mailed out on an annual

3 basis. The most recent one was mailed to the members in

4 October of 2013.

5 The retiree fund has 11,921 active participants.6 That's members for whom contributions have been received in the

7 fund and are eligible for benefits. We pay out benefits on a

8 monthly basis to 13,286 retirees and beneficiaries. And then

9 we also have 4,292 inactive members who have a vested benefit

10 that they will eventually be able to collect.

11 Our asset allocation, obviously, the pension fund, our

12 investment policy is more a long-term horizon. Our breakout is

13 approximately 32 percent in United States equity; 14.4 percent

14 in international equity; 21.8 percent in total fixed income;

15 our real estate investment is just over 20 percent; alternative

16 investments 8.16; and liquid assets are cash in 3.28 percent.

17 THE COURT: Roughly 50 percent in equity; is that

18 right?19 MR. TIERNEY: Total all in, international and U.S.

20 THE COURT: Is that sort of typical for something like

21 this?

22 MR. TIERNEY: For a pension fund, yes, where we have a

23 little more ability to be in equity where we have longer term

24 horizons and take a little more risk. Unless there is other

25 questions, that's all I had on the pension fund.


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1 On the welfare fund, total assets in the welfare fund

2 as of September 30, 2013, were $224,329,992. Our one-year

3 investment return as of September 30, 2013, is 3.66. Our

4 policy was 2.78. Again, doing better than our policy returns

5 expected. Our five year number is 5.44, compared to the policy6 of 6.18. And our ten-year return is 14.90 compared to our

7 policy of 4.95. Again, right on the mark ten years out. We

8 provide benefits to 14,550 actives and 6,367 retirees.

9 Total assets of 224 million equals about is 11.8

10 months of reserve. Meaning, if we stopped receiving

11 contributions today, based on traditional trends, the assets

12 would last almost 12 months is which is actually a good number.

13 You probably want to be somewhere in the three and 12 month

14 space. We are actually in very good shape there. The

15 investment strategy on the welfare fund is different. It's

16 more about preservation of capital. We have to have money to

17 pay benefits. That break out is 11.6 percent in U.S. equity;

18 5.3 percent international equity; 58.6 percent in total fixed19 income; 9.7 in alternative investments; and 14.7 percent in

20 liquid assets or cash.

21 Again, unless there is additional questions, I think

22 that's the status of the welfare fund, which seems to be doing

23 very well.

24 The annuity fund, the defined contribution portion of

25 the benefit, as of September 13, 2013, has total assets 1.85


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1 billion. This 401(k) plan is managed separately by Prudential.

2 It's self-directed participant accounts. It's employer money

3 that comes in, but the participant has the ability to either go

4 online or call Prudential and modify their investments as it

5 fits their retirement strategy. The participants can choose6 from a variety of funds, including U.S. equity, international

7 equity, fixed income, capital preservation and targeted risk

8 funds.

9 Then finally, the apprenticeship fund total assets as

10 of September 30, 2013, market value of assets, were about 11.8

11 million, currently invested in a money market fund. And the

12 trustees are actually looking at alternative investment

13 allocations as we speak on the apprenticeship fund.

14 THE COURT: Why?

15 MR. TIERNEY: The money market is not returning

16 anything. They are looking at other opportunities there.

17 Again, it's -- this is more about preservation of capital than

18 it is long term. So it will probably be more of a fixed19 income.

20 THE COURT: Prudential manages the annuity fund. Who

21 makes the investments in the other funds?

22 MR. TIERNEY: In the pension fund, we have an

23 investment consultant called Gallagher. Gallagher oversees all

24 the individual investment matters that the trustees have in

25 place. On a monthly basis, Gallagher comes into the board


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1 meeting, they report where, how the fund manager is doing

2 individually, they will make recommendations about, maybe the

3 fund manager performing poorly, maybe it's time to replace.

4 They will bring in alterative managers for the trustees to

5 consider, and then the trustees will make the decision on when6 to move. They will also make recommendations, from time to

7 time, about asset allegation or potentially rebalancing. The

8 equities have done very well this year. So it's a potential

9 that our percentage on the equity side may have increased and

10 it's time to rebalance for diversification purposes.

11 THE COURT: Roughly, what are the costs to have the

12 2.46 million managed?

13 MR. TIERNEY: Total investment cost, I don't know off

14 the top of my head, but I can definitely get back to you on

15 that.

16 THE COURT: Would you?

17 MR. TIERNEY: Absolutely.

18 The only other two things I would just let you know,19 two other major projects we are working on is the transition of

20 the computer system within the benefit fund office. It was on

21 an old platform called an AS/400 system. We are transitioning

22 to one of the three major Taft-Hartley computer system

23 companies in the United States. The company is called ISSI or

24 Innovative Systems Solutions, Incorporated.

25 So we're in the process of making that transition. We


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1 are far enough along that we actually started parallel testing

2 of the old system and the new system on October 1. And we

3 expect to go live with the new system, which has been dubbed

4 URBAN, which stands for Union Resources Benefited

5 Administration Network, and we will go live with that on6 February 3, 2014, as the system of record.

7 Finally, we are also working on two major improvements

8 to member communications from the benefit fund office. In

9 combination with the URBAN transition, we are redesigning the

10 fund's web site. The web site will include portals for the

11 members to access information about the funds, including

12 individual information through a secure system, as well as

13 allowing employers to access information through the web portal

14 as well.

15 And then finally we are kicking off on January 1, the

16 issue of what would be a quarterly benefit fund newsletter to

17 the members which is entitled the Benefit Toolbox.

18 THE COURT: Mr. Tierney, you have been the executive19 director of these funds for how long?

20 MR. TIERNEY: Six months.

21 THE COURT: Before that?

22 MR. TIERNEY: The past 12 years, I was with a company

23 called Associated Administrators a third-party administrator

24 based out of Baltimore, Maryland. I was their Vice President

25 Director of Benefits. We handled 65 individual Taft-Hartley


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1 funds from Maine all the way south to Puerto Rico. I was there

2 for 12 years.

3 Prior to that, I was president of Chemical Workers

4 Local 217 in Baltimore. Prior to that, I served eight years of

5 active duty in the United States Army.6 THE COURT: You have a staff, I take it.

7 MR. TIERNEY: Yes, we do. The benefit office staff

8 now is 85 employees on the benefit fund side. On the

9 apprenticeship school, we have about 30 employees admin and

10 instructors.

11 THE COURT: That's a very helpful report. If you

12 could furnish me with the cost information, that would be

13 great.

14 MR. TIERNEY: Absolutely.

15 THE COURT: I don't have any questions.

16 Who shall we turn to? Mr. Walsh, should we start with

17 you?

18 MR. WALSH: Judge, I thought District Council's 30-day19 report was very candid. I think it might be opportune if I

20 yield the start to the District Council to perhaps provide some

21 further detail or explanations for some admissions in the

22 30-day report of ongoing problems.

23 THE COURT: Who will that be? Will that be Mr.

24 Murphy?

25 MR. MURPHY: Sure.


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1 THE COURT: You have the floor, Mr. Murphy.

2 MR. MURPHY: Your Honor, I think the issues we have in

3 putting together the 30-day report, and the ongoing issues with

4 the electronic reporting and following up, are good

5 illustrations of why there needs to be a new IT system within6 the District Council.

7 What we find is that there is often a disconnect or

8 different systems among the out-of-work list, the

9 representation center, the District Council itself, and also

10 right now, the inability to talk, interface with the benefit

11 funds. A comprehensive review of the IT system, along with the

12 business practices would certainly make this whole process a

13 lot smoother.

14 We are still working with the Standard Data

15 Corporation, which is the current IT outside vendor on

16 developing a system by which jobs that are closed can have a

17 turn-off switch so that it will be turned off. That way, there

18 isn't an appearance that there are jobs out there, that a job19 is still open, but that nobody, the shop steward or the

20 designated person, on the one or two person job, is not calling

21 the jobs in.

22 Likewise, there are oftentimes where you will have a

23 job that will be open, it will be worked on for a number of

24 days, even weeks. The job will then go on a hiatus. It will

25 essentially be closed and then the job will be reopened a


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1 number of weeks later. There has to be a way of accounting for

2 that electronically. That's what Standard Data tells us, they

3 should have something by later this week or early next week to

4 implement that and actually carry through with it.

5 There's also the issue that we have where there are6 essentially three methods of reporting. I will review them

7 briefly. One is the devices the shop stewards had been trained

8 on.

9 THE COURT: I did read the reports. I'm familiar with

10 all of that.

11 MR. MURPHY: The problem is that a number of shop

12 stewards, even though they have the devices and will sometimes

13 use them, will -- and we know the devices are not in the shop,

14 they are active out there -- they will, instead, call into the

15 out-of-work list and do the electronic filing via telephone.

16 The telephone system is a backup in case somebody left the

17 device at home.

18 THE COURT: It's not really electronic filing. It's a19 call system.

20 MR. MURPHY: It's over the phone. The out-of-work

21 list is now the implemented reporting. It's like calling a

22 bank or investment house where they have that as a backup with

23 it.

24 The operators then electronically enter the

25 information, pull it up. That's what my understanding is. The


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1 MR. MURPHY: I think the problem is an underlying

2 problem of hardware and software and having to integrate the

3 system. Along with that would come additional training, having

4 devices or interfaces that might be much more user friendly.

5 These were really unknowns for us, because a lot of the way the6 work practices are performed are all with paper. There is that

7 culture, and it is going to take some time and some effort to

8 wean people from that system and get them into the 21st

9 century.

10 THE COURT: What are other unions doing?

11 MR. MURPHY: It really depends on the unions. Some of

12 our union clients are probably far more backwards. Some of

13 them in the entertainment industry have nationwide integrated

14 systems in which they can track any kind of a grievance. They

15 can pull up photos. They can pull up videos. They authorize

16 people from around the country. If they are looking for

17 similar stuff, can do searches. They would have the

18 arbitration decisions that are all logged in. So it's a range19 of systems that they have in place, but the more far-seen

20 unions that are clients of ours have these integrated systems

21 and thought about them for a long time. They are constantly

22 upgrading them and have a very good, sort of IT infrastructure,

23 as well as ongoing maintenance and replacement system in place.

24 Other smaller unions are maybe even more primitive. I

25 would have to say that for its size and its net assets, about


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1 $60 million at the District Council, is pretty far behind the

2 curve on this. That's why there is the need, which I think the

3 District Council has grabbed onto, to modernize its IT systems,

4 as well as start looking hard at its business practices. Judge

5 Jones can speak to that in even more in depth.6 THE COURT: Judge Jones, do you want to weigh in on

7 that?

8 MR. McGUIRE: If I can interrupt, in the construction

9 industry, there is nothing like this. There is no electronic

10 reporting of any sort. We have a lot of unions which refuse to

11 allow us to even log in their members, refuse to allow the

12 members to sign in.

13 This is an enormous step forward as far as we are

14 concerned. On the employer's side, we are hoping it will be a

15 very beneficial precedent for the industry.

16 MS. JONES: I echo what Mr. McGuire said. There

17 really isn't a comparable with the union of this size. This is

18 going to be an opportunity for this union to be a model. It's19 not like any comparable union. There is nothing like what any

20 comparable has done or has currently.

21 We have also begun a survey to see why the numbers

22 have gone up of unreported, or lack of use, why the numbers

23 have gone up for telephone calls. We haven't concluded that

24 yet, but it could be some of the numbers are simply the

25 addition of new jobs with the same reasons that the old jobs


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1 had for not being able to use their tablets.

2 In any event, whatever it turns out to be, the cause

3 of this increase in using the telephone to report, the EST,

4 Steve McGuinness, sent out an e-mail letter to all stewards to

5 let them know that they had to report electronically, there6 were no excuses, and as continued to and will continue to

7 institute training.

8 Judge, I don't know if you want me to get into my part

9 of this now.

10 THE COURT: Yes.

11 MS. JONES: First, I wanted to thank you for the

12 adjournment that you gave the District Council. I think we

13 used the time profitably.

14 In my letter of October 24, I brought you up to date

15 on the fact that there was a technology committee formed. That

16 committee had its first meeting on October 25. Steve

17 McGuinness presided over the meeting. An RFP was distributed

18 to all present at the meeting, and that modified RFP, with the19 approval of Mr. Walsh, was ultimately sent out on October 31.

20 Today is the day that we expect to have submissions from

21 technology consultants, and we expect that the vetting and

22 hiring process will begin some time next week or early the week

23 after.

24 The RFP requires this technology consultant to study

25 the business practices of the union, as well as the current


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1 technology. I think everybody agrees the current technology

2 doesn't work. It doesn't talk to each other. It doesn't talk

3 to the funds.

4 In fact, all of the electronic reports that are coming

5 in cannot be, at the moment at least, seen by the funds. They6 are still relying on the standing of paper shop steward

7 reports.

8 We look forward to the funds integrated system coming

9 up on February 3, I think Mr. Tierney said. We hope by then to

10 be able to start to coordinate with the funds so that we can

11 find discrepancies between reported hours and payments by

12 employers.

13 The committee was also tasked to begin the process of

14 examining business practices at our first meeting on October

15 25. We received submissions from virtually all of the

16 departments. Some of them are very good. Others need more

17 work. It's the beginning of a process. Mr. Walsh has brought

18 in his own technology consultant to jump start the program.19 While the union was at first a little disappointed that there

20 was no waiting for their technology consultant to get in, we

21 are cooperating with Mr. Walsh and his technology consultant

22 who has begun to interview the department heads and has already

23 proposed one and possibly two pilot projects for the use of

24 technology in the business reps' department and possibly going

25 to job referrals in the out-of-work list departments.


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1 When our technology expert comes in, he will have the

2 benefit of all of this previous work done by Mr. Walsh's

3 technology expert.

4 With respect to all of these initiatives, they are

5 obviously good. I think they are going to be productive. The6 union knows it needs an integrated technology system and an

7 upgraded one. It also knows that in order to have one, it has

8 to document its business practices. That is going to be the

9 subject, among others, of the next technology meeting where two

10 or three of the department heads are going to present and

11 comments are going to be made with respect to how to improve

12 the written practices that we received already.

13 The second item I would like to report on is Mr. Walsh

14 and I have had very lengthy discussions. We meet frequently.

15 I think we are very open with each other, and it's very

16 fortunate. He has advised me of what his goals and priorities

17 are over the next few months before his term ends. With

18 respect to that, I appreciate it, because the union wishes to19 cooperate with respect to all of the initiatives and all of the

20 goals that he provides.

21 To this end, we would also like to begin to have

22 conferences with the government on a monthly basis, I don't

23 know if that will be necessary, in order to continue to discuss

24 in details how the union is doing. It's very interested in

25 demonstrating to the government and to the Court that it can go


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1 forward, and be both transparent and democratic and get into

2 the 21st century. I expect and I hope that I will have more to

3 report the next time.

4 The only other question I had, your Honor, was I

5 believe there is an election that Mr. Walsh has scheduled. I6 think it's actually the election that you had approved

7 previously, but just delayed. The only comment that I would

8 make on that is the union is very busy, as you can see from all

9 the collective bargaining agreements that have come in in the

10 last several months. This election is going to put an added

11 strain on it. It doesn't matter. We are going to keep going,

12 but whoever gets elected is going to have about six months in

13 office before the next election process starts up, the

14 campaigning, if you will. I wanted to bring that to your

15 attention.

16 THE COURT: What is the import of that?

17 You have to have an election, right?

18 MS. JONES: I think if Mr. Walsh thought it was19 prudent not to, he could make that motion to the Court.

20 THE COURT: Would you prefer that?

21 MS. JONES: Yes.

22 THE COURT: Why would that be?

23 MS. JONES: I think that we are making strides. We

24 already are dealing with so much in terms of bad technology

25 that we're trying to work on, which then reflects on reports


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1 For the fifth time now in this fifth 30-day report, we

2 see that members cannot have confidence that data they need to

3 rely on is available to them. I think that the various charts

4 and exhibits in the 30-day report reflect the amount of time it

5 takes for the manual oversight by the business reps and the6 people at the District Council to close out these jobs. When

7 you look at the figures for the most recent entries, the 31st

8 of October, you still have, across the board, completely

9 unacceptable percentages of jobs that do not have time reported

10 in the system. If I were a member, I would be very discouraged

11 about that five months into the process.

12 THE COURT: If you look at the transcript of these

13 prior proceedings, it wasn't as if on May 1, the baby was born.

14 There was discussion and has been about the ramp up prior to,

15 and there also was big discussions about changing some of the

16 fundamental provisions of the collective bargaining agreement

17 of which this was a negotiated piece. Those changes went into

18 effect immediately.19 There is more to the story than just everybody first

20 took a look on May 1, and that's why it's taking so long.

21 MR. WALSH: Judge, of course the ultimate system

22 relies on a virtually flawless electronic program, which is

23 easily accessible by stewards who want to, on a strictly,

24 timely basis, close out these jobs. The people who need to

25 know that at the council can rely on these jobs being closed.


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1 The members can then rely on the data, if it's all

2 appropriately put into the system.

3 I think that the District Council can do more in

4 informing stewards that there are consequences for failing to

5 enter this time into the schedule contemplated this District6 Council. This goes to compliance with multiple orders of this

7 Court.

8 I think the Number one obligation of the District

9 Council in this case is to comply with standing orders of this

10 Court. I think more can be done to inform the stewards that

11 there are consequences, including that if they are found to

12 have deviated from the policies promulgated by the council,

13 that they will no longer be able to serve as shop stewards.

14 This is a solemn obligation of the stewards to get this time in

15 on a timely basis, and the District Council needs to apply, in

16 the interim, the appropriate amount of resources to give the

17 members the reliability they need to make Operation Watch Dog

18 effective.19 There was contemplated a dispute resolution program

20 that the time entered by the stewards would generate an e-mail

21 that would be sent over to the employers, and they could accept

22 that time or reject it. Right now, it's my knowledge there is

23 no procedure in place which the business reps must follow in

24 order to quickly and efficiently resolve these disputes. Of

25 course, if they can't be resolved, they would move to grievance


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1 and arbitration, but it will be a matter of record.

2 The council needs to draft and promulgate a policy,

3 and enforce, and educate the reps in this policy as to how to

4 close out these disputed jobs, so we can get that time into the

5 system as well.6 I'm very glad that the benefit funds is near

7 completing their conversion to the URBAN system. It is

8 contemplated that in the spring, at least in theory, there will

9 be the ability to share computer to computer, the data entered

10 by the stewards on the council side with the benefit funds. I

11 have suggested to District Council and to benefit funds that

12 there are measures that can be taken in the interim so the

13 benefit funds can benefit from the time entered into the

14 District Council system, whether it's by giving someone in the

15 collections department at the funds "read only" access to the

16 employer figures that the District Council has collected, or to

17 e-mail the data, or burn a disk and send it over to the

18 collections department. Right now the system that the funds19 has, has been in place for over ten years where they take the

20 scanned steward records that go into a system and it takes

21 weeks to get the data entered. You are looking about a 60-day

22 lag between the time the job actually had the work done and the

23 time the funds people are looking to see if the hours remitted

24 by the employer match those numbers.

25 I think there is an economy of scale here. You can


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1 take the larger jobs, and as a ritual, you can send that data

2 to the benefit funds to mitigate the risk of any kind of fraud

3 or attempted fraud on the larger jobs. It could be a reverse

4 triangle. Mr. Tierney has indicated to me informally that he

5 is a very amenable to receiving that data. I asked the6 District Council to make that data available in close

7 consultation with Mr. Tierney so that it's given in a

8 manageable way.

9 With respect to the IT and business practices

10 question, there is still pending my motion for adoption of

11 those recommendations. As the Court is aware, we did negotiate

12 with Mr. Murphy a proposed stipulation, which was rejected by

13 the delegate body. Obviously, the result of such a stipulation

14 would have built into this process some clear enforceability,

15 some clear schedules. Right now, we do not have any schedule

16 on any of it, neither does the government, any enforceability.

17 Judge Jones specifically mentioned the end of my tenure. It is

18 an imperative in my view, and I believe the government concurs,19 that there be an enforceable order or stipulation entered in

20 this case so that we are addressing the potential for gigantic

21 game of rope-a-dope being played here. The schedule I think

22 can be flexible, but I think it needs to be committed on a

23 reason basis to writing, either by stipulation or if necessary

24 through litigation.

25 MS. JONES: Judge, I neglected to mention that the RFP


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1 that was issued, and that we are getting submissions on today,

2 requires this technology consultant to produce a product to the

3 union, which will lay out a design of business practices and

4 the technology that will match them. That product is supposed

5 to be delivered by March 30. We expect after that to be able6 to then put out an RFP for a vendor, a system's vendor who can

7 come in and produce what we want.

8 I think the original stipulation by Mr. Walsh provided

9 for that vendor to be hired by March 30. We are behind by a

10 month or two. We are trying to do it reasonably and with the

11 union actually doing it for themselves in as expeditious a way

12 as they possible can. I think we would be six weeks behind Mr.

13 Walsh's proposed stipulation. That particular contract that

14 would be executed with the vendor, the system's vendor, I think

15 would provide the description of the stipulation and order that

16 could be enforced by this Court in terms of business practices

17 and technology.

18 THE COURT: The RFP that's currently outstanding is19 just an RFP declaratory to the real RFP implication.

20 MS. JONES: Yes. The original stipulation called for

21 hiring internal employees for the union. Frankly, the District

22 Council is going to need their own IT director. That's

23 something that is on the table.

24 THE COURT: I thought that was happening already. I

25 believe we discussed that some time ago. There are no internal


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1 IT people at the District Council?

2 MS. JONES: At the moment there are not. It's

3 impossible for them to sit down and figure out both business

4 practices and how they relate to technology without a

5 consultant. That's what they are getting. In addition, they6 also have begun to realize that they do need, within the

7 council, a director of technology, and that will be on the

8 table.

9 THE COURT: How did they think they were going to

10 implement the collective bargaining agreement provisions with

11 respect to technology without somebody who knows about

12 technology?

13 MS. JONES: What they wanted to do was to get this

14 vendor in, the technology information person, who can take them

15 through this, help them to write their business practices,

16 which is a process we are already doing before the vendor gets

17 here. Then we will give them an integrated system, a design

18 that will show what they need. In the interim, it's on the19 table to consider hiring an internal IT person. We are not

20 totally without any expertise, but we do not have an IT person.

21 All I wanted to add was that the contract that would

22 be executed with the vendor who would provide the systems,

23 which would have the description of the practices as well as

24 the IT upgrade, would also have a completion date in it, which

25 would be decided upon based on what the vendor and the council


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1 and the IT consultant thought was appropriate. We have a

2 budget. I think if the council goes forward and is able to

3 enter into a contract with a systems vendor by May, that would

4 give us the outlines.

5 THE COURT: Best case, it's a year from the collective6 bargaining agreement, May of 2013.

7 JUDGE JONES: Your Honor, I don't know why the council

8 has had Standard Data all of this time. I can tell you that

9 every step of the way, it's been the cart and a horse. It's

10 been hard to get the electronic reporting data searchable so

11 that we can avoid issues like jobs that actually aren't open

12 being represented as open, because Standard Data has been

13 unable to come up with the fixes. We want to do it right this

14 time.

15 MR. WALSH: Judge, just a footnote, with respect to

16 the business practice, which I think is just as important as

17 the IT part of my motion, I do believe that the District

18 Council must take steps to do everything it can to move towards19 improved business practices.

20 I will describe the line of what happens when a

21 contractor calls the union and reports a job. The contractor

22 is calling the out-of-work list department. That's when this

23 process of generating paper begins. They write down key

24 information. Paper is then sent down to the rep center. There

25 are photocopies. Paper is given to business reps who have to


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1 hand sort all of these jobs that they have to go to when they

2 are reported by contractors, and stewards need to be appointed.

3 What I propose, as an interim measure, is a pilot

4 program where the contractor calls, select operators will put

5 the information to a fillable pdf, and e-mail that filled pdf6 down to the rep center to business agents, to the IG's office.

7 There will be no paper, unless somebody decides to print

8 something out.

9 The union has agreed to select two business reps to

10 implement the pilot program. The rep would fill in the pdf,

11 e-mail it back to the council in his or her daily rounds. He

12 or she would not have to go to the morning briefing or the

13 afternoon debriefing, which takes a tremendous amount of time

14 out of the schedules of the representatives and takes away from

15 enforcing the contract, from having the time to visit jobs they

16 are not on the schedule, perhaps larger jobs where the risk of

17 a fraud is greater. There is an is an in terrorem benefit to

18 contractors thinking they might have a business rep go to one19 of their jobs on an unexpected basis.

20 My team is going to be meeting tomorrow morning to do

21 a dry run inside the IRO's office. If it works, we are going

22 to sit down with the District Council and brief, not only

23 counsel, but the people who are actually be participating in

24 the program, to see how we can get this thing off the ground in

25 the next couple of weeks.


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1 THE COURT: What is the doable proposition for me, in

2 your point of view, with respect to this issue?

3 MR. WALSH: I think right now we can inform the Court

4 of where we are. Judge Jones and I will continue to meet and

5 all our meetings have been very candid and constructive. There6 have been many times we have agreed to disagree. I think I

7 have said everything that needs to be said in terms of the

8 imperatus here. I do think that by the end of the year, we are

9 going to have a very good picture of whether the District

10 Council is applying enough resources in all of these areas, or

11 whether we are going to have to come back and clarify specific

12 parts of a motion and either agree on some stipulation or I

13 will ask the Court for an order perhaps in multiple regards.

14 THE COURT: It's a little surprising to me there is no

15 IT capability within the union right now. It sounds like the

16 lawyers are running the IT department.

17 MR. WALSH: I am actually grateful for the work of

18 counsel for the District Council in pressing these issues and19 trying to get the council to focus on getting solutions which

20 benefit the membership.

21 The District Council has lacked appropriate business

22 practices for many, many years. Now there is a very bright

23 light being shined on all of these areas. I understand that

24 there is a certain amount of shock when criticisms are made,

25 and certainly when they are made in a very public forum. That


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1 does not relieve the District Council from, once they have been

2 identified, from moving with enthusiasm to fix all of the

3 problems, and to operate the District Council according to best

4 practices.

5 I have never accepted the notion that there is too6 much going on in District Council. That is the nature of

7 business. Sometimes you are busy and sometimes you don't get

8 time to play golf or tennis or watch the Giants. This is

9 imperative and the clock is ticking, as far as I'm concerned.

10 The time for best practices is here, and it's up to the

11 District Council to decide whether they are going accept that

12 challenge and get these problems solved in a very near term or

13 whether I'm going to ask the Court for a reasoned solution to

14 these problems.

15 THE COURT: Did you want to address the comments about

16 the election?

17 MR. WALSH: Judge, I wrote to the Court in August on

18 the need for a special election. The term that is being filled19 does not expire until January 11, 2014. The person elected in

20 this election, and the votes will be counted on January 24,

21 will be installed at the first delegate meeting in February.

22 He or she will then serve for almost a year. It's important to

23 remember that the District Council is a monolith. It is a

24 labor organization under federal and state law. The people who

25 are in positions of authority and fiduciary trust must get


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1 in particular as anticorruption measures did not. That is

2 something that I find to be a little bit of concern.

3 Whether this turns out to be a model for other unions,

4 it's way premature to make that prediction, Mr. McGuire,

5 because we don't have a template yet. It's far too early to6 think this is going to be a model for anybody else. It doesn't

7 even exist at this time.

8 I will see you again in January on the 28th at 9:30.

9 Thank you so much.

10 (Adjourned)

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11.18.2013 Court Conference

Documents

Transcript of 11.18.2013 Court Conference