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An Analysis By Chuck Cannon

September 24, 2001

PileDrivers Local 34, Oakland /San Francisco
(The text of this commentary must be circulated to as many union members as possible)

As those of you who have read my articles know, I have been striving to expose the truth about the United Brotherhood of Carpenters Union. The views expressed in those articles, as representing the truth are even more profound today than when they were originally written. I apologize for not being able to write in a manner that makes a complicated subject understandable to all. In this analysis I will attempt to rectify many of my pervious shortcomings.

I have long despaired that enough of us would ever comprehend what was really happening to our union. Even our labor lawyers haven't had a clue to what was really going on. If they had any real clues, they certainly did not communicate them to us. To understand what is happening to our union and what is intended to happen to all unions; we have to quit thinking "union," and start thinking, CORPORATION. Let's discuss what we are. Of course first of all we are members of a labor union. But, by virtue of our pension plans we are much, much more than a labor union. Our pension funds are in reality MUTUAL FUNDS. Money is deposited into an account established for us in our names to be invested for our benefit and retirement. Our pension funds do essentially the same thing that mutual funds do when we buy shares in any commercially established mutual fund through a stockbroker or directly from the fund itself. The only difference is in the ready availability of our money to us, and its tax treatment. And with some types of investments ( 401Ks and other tax-delayed retirement investments) even this difference does not apply. In fact, union pension fund participants are denied most of the rights and privileges afforded regular mutual fund participants, such as monthly account statements, quarterly investment manager's reports, annual reports, annual stockholder's meetings, and the right to vote directly for officers and directors of the fund. We are as dispossessed in this regard as we are as union members. There is no practical reason for this exclusion except that the top union officials, pension fund administrators, and the politicians that they are in cahoots with don't want to afford timely information or universally accepted investors rights to union members holding pension fund accounts.


In addition to truly being shareholders in mutual funds and being institutional investors, union pension fund participants are also members of a very elite club of *MERCHANT BANKERS. Many mutual funds are in fact merchant banks or function as merchant banks through their investments in the real estate markets, venture capital investments and other types of money lending. These facts are certainly bits of information that the Business Unionism Partners don't want union members to know or to ever become aware of.

Understanding this one essential truth is the key to understanding what is happening to the Carpenters Union and what is intended to happen to other American unions and the unions of other modern industrial nations. The current chaos is not and never has been about labor issues except the establishment of dictatorial control over unions and their members is to assure a quid pro quo1 (something for something). The merchant banking executives (union officials and pension fund administrators) must provide extremely favorable labor controls to borrowing entrepreneurs in order to capture them as clients. In short our top union officials and pension fund administrators are committed to making sure that union members will do nothing to seriously harm the profitability of those who have borrowed from (their) our merchant banks.

We must recognize that the aggregate of pension fund monies constitutes merchant bank capital2 and that these pension-fund merchant banks are no different than any other Wall Street Bank or corporate enterprise. They have the potential to attract corporate raiders who are only interested in exploitation for profit, just the same as with any other business or corporation in our economy. We must recognize McCarron for what he is. A corporate raider whose target is all of labors' pension fund monies.

There are two juicy takeover targets belonging to the AFL-CIO, the AFL-CIO Building and Investment Trust (net assets 1.244 billion) and the AFL-CIO Housing Investment Trust (net assets 2.58 billion). Their combined assets are estimated to total in excess of 3.8 billion dollars. In 1997 McCarron established his own "Builders fixed Income Fund, Inc." SEC records list the principal owners as of April 2, 2001 as the Carpenters' Pension Trust Fund of St. Louis, owned 59.82%. The Carpenters' Pension Fund of Illinois owned 10.53% and the Building Trades United Pension Trust Milwaukee and Vicinity, owned 14.55%. A report dated 6/30/01 listed net assets of $206,367,743.00 Can the tiger shark swallow the blue whale? McCarron is betting that it can in a few big bites.

As for McCarron's Builders Fixed Income fund versus the AFL-CIO's two bigger trusts, the logic is very simple; if you want to take over a corporation, position your own corporation to undercut the other guy's business. Cut his customers a better deal than he can, make his clients flock to you and when his business stagnates, buy or completely force him out of business. In McCarron's case guarantee cheaper; trouble free labor along with the loans to him. This is what McCarron is up to. SIMPLE! Age old Wall Street takeover tactics, it has nothing to do with labor principles. Now we know why a union dictatorship is vital to McCarron's plans.

There are tools that are essential to the employment and recycling of the investment money and assets controlled by the "Business Unionism Partners." They are the tools provided by the quasi-federal government corporations3 in its relationship with all big investors and investment institutions. Consider that the government is the biggest money launderer in town. Institutions like the AFL-CIO Investment Trusts originate loans to entrepreneurs. These loans are then sold to quasi-government institutions like the Government National Mortgage Assn. (GNMA or Ginnie Mae), The Federal National Mortgage Assn. (FNMA or Fanny Mae), The Federal Home Mortgage Loan Assn. (FHLMC or Freddie Mac), these loans then become collateral units by the issuance of bonds secured by mortgages. These mortgages are ultimately insured by the taxpayers. If there is any doubt about it, remember the great Savings and Loan debacle of the 1980s and who paid in the end.

The Investment funds and trusts, outfits like the AFL-CIO's Investment Trusts and McCarron's Builders fixed Income Fund, or our labor union pension funds, or ordinary people like you and me who have money to invest, buy these bonds (instruments) in the investment markets. What are bought are participations in the larger package. The financial institutions (merchant banks) actually buy back the loans from the quasi-government corporations minus the risk. The principal and interest is paid on these loans by the borrowers to the appropriate agencies. The interest that is paid on the loans is passed on to the bondholders (participants) at periodic intervals. As loans are paid off, in some situations the paid off principal is also passed back to the bondholders and is deducted from the value of the bond at maturity. In other situations the bondholder's share of the principal is only returned when the bond matures. The significance of this exchange is that in the process of turning the loans into collateral through the issuance of quasi-government bonds, much of the risk is transferred (laundered) from the borrower and assumed (ultimately) by the broad spectrum of taxpayers. This arrangement has worked very well except for the 80s S&L scandal. It is necessary to mention it here in order to explain how the system works and how institutions like the AFL-CIO's Investment Trusts and McCarron's Builders Fixed Income Fund function, and are a part of and work within the system. It is a very profitable system entailing minimal risk.

There are takeover sharks ever lurking in the financial waters looking for targets. When a target is sensed they go for it in a feeding frenzy. However few law-abiding people would see labor unions and their pension funds as potential takeover targets because of their unique nature and status under the law. Fewer yet would be in a position to attack, but McCarron and other 'Business Unionism" sharks have been positioning themselves for this attack at least since 19944. So what we see here is strictly business the way it is done every day in the corporate world. Labor principles and morals don't enter into it. If the end result happens to amount to a lot of misery for working people, well, that's just business. The worst news is that the ambitions of McCarron and the Business Unionism Partners are global5.

What's to be done? Labor lawyers are not effective in this situation; their discipline has not yielded one clue as to what was going on. But corporate lawyers and specifically anti-trust lawyers might have had some effect. McCarron has been the inter-locking director on the boards linking ULLICO (United Labor Life Insurance Co.), Perini Corp., and PB Capital Partners. He is also listed as being the President and Chairman, Inland Empire Hotel Corporation; President, RPS Resort Corporation; President and Chairman, Santa Nella Hotel Corporation; and President, THMI Motel Corporation6. He has been on all sides of the market, up down and sideways.

The nature of the businesses that he is occupied with suggests plenty of conflict of interests. If, he has used his position as an officer for any of these companies to benefit from the adverse conditions that he is imposing upon the members of the Carpenters Union, or if because of the linkages between corporations self dealing has occurred; an anti-trust inquiry is warranted and maybe an anti-trust suit if legal grounds can be found to support it. While labor unions are legally exempt from the anti-trust statues, commercial corporations and their officers are not exempt. This is an avenue that should be pursued even if McCarron has recently perceived his indiscretion and resigned the directorships. The fact still remains that the restructuring of the Carpenters Union was carried out while he was an inter-locking director of these named and maybe other corporations yet to be discovered. If the labor movement and its unions could rouse themselves from their current stupor, maybe a class action suit might be initiated. And last, the fight to regain political control of our unions must continue and grow.

*Merchant bank
A British term for a bank that specializes not in lending its own funds, but in providing various financial services such as accepting bills arising out of trade, underwriting new issues, and providing advice on acquisitions, mergers, foreign exchange, or portfolio management.

Reaching a new plateau_ Why institutional investors should become their own merchant banks. Peter D. Ashe

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