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Mazzola Is Slippery 

The union boss has once more escaped punishment for funds diversion

Wednesday, Jun 6 2007
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According to the U.S. Department of Labor, beginning in the 1990s some $76 million was siphoned from union worker benefit funds under the influence of San Francisco labor boss Larry Mazzola. More than $50 million of that money was used to prop up Konocti Harbor Resort, a Lake County concert venue abutting and near more than 100 acres privately owned by Mazzola and his family.

Last year, Mazzola cut a deal with a real estate investment firm owned by Democratic Party lobbyist Darius Anderson in hopes of pulling political strings that might turn the resort into a much more valuable Indian gambling casino complex. While Mazzola, business manager of Plumbers union Local 38, and his agents were pursuing the gambling deal, Mazzola's personal attorney attempted to re-zone Mazzola's own land near the resort so that the entire area might become a condominium, housing, and commercial development with a gambling mecca at its core. Local opposition stalled the re-zoning and gambling plans. But had they succeeded, the escalation in property values could have personally enriched Mazzola by millions of dollars. And these schemes wouldn't have even been conceivable had Konocti Harbor Resort not been kept afloat with vast amounts of money that was docked from workers' pay.

By docking workers' hourly pay to finance an ambiguously named "convalescent trust fund," then causing $50 million to disappear into the worthless investment that was Konocti Harbor Resort, Mazzola and union officials under his control deprived workers of benefits money they paid for out of their own union dues. By attempting to leverage that "investment" in a way that would increase his own net worth, he was engaging in the sort of apparent attempted sweetheart dealing that gives union bosses a bad name.

"I knew I'd never see it, and I knew they were funneling it up there," said former union member Edward Birmingham, who unsuccessfully sued Mazzola during the early 1990s over the Konocti funds diversion, then worked with Department of Labor investigators as they prepared for the just-settled Labor Department suit. "The union members were just being used."

Yet, appallingly, regulators will not punish Mazzola in any meaningful way. Despite years of federal investigations and lawsuits pertaining to the funds diversion, Mazzola is poised to get off without so much as a slap on the wrist. (An assistant to Mazzola's attorney said the attorney would not be available for comment. Mazzola himself did not return a message on his voice mail requesting comment. A Labor Department spokeswoman would not confirm the existence of the impending settlement, which is detailed in court hearing transcripts.)

According to a new settlement agreement between Mazzola and the Labor Department described in court proceedings earlier this month, Mazzola emerges from a three-year legal ordeal stemming from the funds diversion allegations unscathed.

Mazzola won't be removed from his union leadership role. And he will continue to help overseeing some union benefit money. As a concession Mazzola will be required to step down as a member of a board of trustees overseeing worker benefit funds, perhaps by the end of the year. Mazzola will be allowed to remain for two years on a board overseeing a worker training fund. And Mazzola's son, Larry Jr., will be allowed to sit on the board of trustees overseeing the union local's various pension and other benefit funds.

As part of the settlement, Larry Mazzola Jr. will be required to take a course on the concept of fiduciary duty.

The union has also said it will attempt to sell the resort — but Mazzola is not required to sell it as part of the settlement. A deal is supposedly "in the offing" whereby a company called Whitestar Investments LLC would pay $25 million, possibly as part of an Indian gambling deal. Ulico Casualty, an insurance company specializing in fiduciary liability insurance for labor unions, will pay the Labor Department $3.5 million in fines.

Perhaps there were some facts — unannounced in the reams of court filings in Chao vs. Mazzola, the Labor Department lawsuit alleging funds diversion filed in 2004 — which explain why the settlement was so lenient. It's impossible to ascertain without knowing the minds of Labor Department officials. Yet the Department is not commenting on, or even acknowledging, the settlement that's spelled out in hearing transcripts.

It's possible, however, to view Larry Mazzola's continued approach to the Plumbers' union as a family business, just as his dad, Joe Mazzola did before him, and just as Larry Jr. is being groomed to do down the road, as an example of unprecedented popular indifference to the plight of the pension-holding working stiff.

With baby boomers nearing retirement age, and U.S. pension fund assets growing into the trillions of dollars, protecting this money from opportunist union bosses such as Mazzola is a worthy populist cause. A half-century ago Bobby Kennedy riveted America by grilling Jimmy Hoffa about looted pension funds. Surely it might be possible to again capture the public imagination by confronting union corruption now that there's so much more at stake. A good start might be for San Francisco candidates for mayor to promise they'll remove Mazzola from his current post as president of the San Francisco Airport Commission, and for our state and federal representatives to propose legislation requiring union leaders to disclose their personal assets, just like politicians now do.


If there's such a thing as a modern Bobby Kennedy, a man willing to take on union corruption with a dramatic flair, that might be former assistant U.S. attorney Robert Stier, who in 1987 was appointed by a judge to clean up corruption in a New Jersey Teamsters local, and later root out mob influence and corruption from the national union, before denouncing Jimmy Hoffa's son Jim Hoffa in 2004 for being uninterested in banishing racketeering from the international union he ran.

Stier says it's now more possible than ever for wrongdoing by union officials to go unnoticed.

"As a general matter, labor corruption is a low priority for the federal government," said Stier, not speaking specifically about the Mazzola suit, which he was not familiar with.

It's not that Labor Department investigators haven't tried. In the mid-1980s the Department sued Local 38, when the union was under the management of Mazzola's father, Joe Mazzola, for paying a local physician friend $250,000 for conducting a bogus financial analysis of how to manage Konocti Resort. And the Labor Department sued the national United Association of Plumbers and Pipefitters in 2002 for sinking millions of pension dollars into a suspicious hotel real estate investment — at a time Larry Mazzola Sr. served on the national union's general executive board.

"When you look at the context for the plumbers in real estate, their record with the Department of Labor is horrible," said Ken Boehm, executive director of the National Legal and Policy Center, a conservative public-integrity group.

In the face of fruitless federal investigations, will union officials now become more emboldened to engage in corrupt behavior?

"There are still corrupt labor officials, and there are racketeers who see benefit funds as a pool they would like to tap into," Stier said. "The labor movement isn't clamoring for more oversight and regulation. So who's out there asking for protection of the workers from exploitation by union officials?"


My inquiry into the Konocti Harbor fiasco didn't produce all bad news. I ran across a possible sign of hope for another type of working stiff — newspaper hacks.

I wish I could say I broke the story of the Labor Department's settlement with Larry Mazzola and Local 38. But I have to give that credit to Elizabeth Larson, and an incipient phenomenon I'll call: Night of the Newspaper Living Dead.

Larson, you see, is part of the journalistic jetsam floating all over America, as the tycoons running newspapers seek to improve profits by jettisoning staff. The San Francisco Chronicle is poised to lay off 100 reporters and editors. And a new report on Gradethenews.org says MediaNews, which now owns all Bay Area non-free daily newspapers except the Chronicle, plans to cut a quarter of its newsroom staff, or 60 positions.

After five years of grumbling with other MediaNews editors about the company's miserly approach to journalism, Larson, a former MediaNews Group editor at the Lake County Record Bee, has sought payback by starting up a news media outlet herself at (http:// lakeconews.com). Since January she's been beating her former employer on local stories — including the Mazzola settlement.

"In October I had sort of a come-to-Jesus moment. I'd been pushed really hard for a long time," she said. "If they say they want me to cover local news, and not give me the resources, there's a serious breakdown here. And I was hearing this from other editors in the MediaNews company."

A week ago, after I found a settlement notice in the Chao vs. Mazzola Case file, and getting no comment from the Labor Department, I called various sources in Lake County and elsewhere. One of those sources told Larson about my inquiry, and she had the good sense to ask the federal courts reporter for a settlement hearing transcript — and thus beat me to the story on her 600 unique-visitors-per-month Web site.

Larson is coy about her plans to actually turn scoops into money from the news site, which currently carries no advertising.

"We get between 25,000 and 35,000 unique visitors a month," says Record Bee publisher Gregg McConnell. "Our circulation is growing. We are one of the few newspapers that are growing. Anyone who wants to put up an independent news Web site, more power to them."

Despite long odds against success, Larson hopes she's part of a larger trend of untethered journalists launching publications of their own. She cites the example of www.santabarbaranewsroom.com, run by ex-employees of the Santa Barbara News Press.

"You don't have the incredible expense, ink, paper," she said. "Until the media industry starts to really remember their basic responsibilities, and looks at it like something beyond 30 and 40 percent profit returns, I think they're going to get Internet competition like they've never seen before. And I think it's good."

Who's to argue with that?

About The Author

Matt Smith

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