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The WTU after Bullock
Questions remain for D.C. teachers' union
(Published October 20, 2003)

By MARY LEE MALCOLM
Staff Writer

The fur coats, the Tiffany silver, the jewelry, wigs, antiques and designer clothes — all things that Barbara Bullock bought for herself with funds she admitted to stealing from the Washington Teachers’ Union treasury — are now gathering dust in an FBI evidence room, awaiting a federal marshal’s sale some time in the indefinite future.

Bullock, former president of the union, pleaded guilty Oct. 7 to federal mail fraud and conspiracy charges. She will be sentenced in January to a maximum of 10 years in prison and fined up to $500,000.

But questions remain for the rank-and-file members of the WTU. Where did all that money — upwards of $5 million — go? Why did it take five years to discover such blatant fraud on such a massive scale? And how can the WTU get the money back?

So far, top billing in this story of scandal has gone to the dethroned officers of the WTU and the friends and relatives who assisted them. Four have pleaded guilty. But prosecutors have made clear that the investigation is far from over.

"We intend to follow this trail of corruption — who is involved and to what extent, and bring them to justice," vowed U.S. Attorney Roscoe C. Howard Jr. at a press conference following a U.S. District Court judge’s acceptance of Bullock’s plea. "We will follow the assets."

And while the criminal investigation unfolds, a second arena – populated by many of the same players – has opened up. The stage is civil court. There, too, the name of the game is follow the assets.

Officials from the national office of the American Federation of Teachers began an investigation of the WTU, one of its local affiliates, in the summer of 2002 after members of the local complained to the AFT about excessive payroll deductions for union fees. According to Klausner Dubinsky & Associates, the accounting firm hired by the AFT leadership to do a forensic audit of the WTU’s finances, there were a host of people regularly pillaging the local union’s treasury.

The audit report names Bullock; her chauffeur, Leroy Holmes; and Gwendolyn Hemphill, who was Bullock’s executive assistant. Hemphill was also co-chairman of Mayor Anthony A. Williams’ 2002 re-election campaign until the WTU scandal broke, at which point she resigned from both positions. Former WTU treasurer James Baxter also was allegedly involved, as were a local accountant, James Goosby; Hemphill’s daughter, Cheryl Martin; her son-in-law, Michael Martin; a friend of Martin’s, Errol Alderman; and Bullock’s sister, Gwendolyn Clark. The report concluded more than $5 million had been stolen over a period of six years.

Holmes, Michael Martin and Alderman have pleaded guilty and are cooperating with investigators. Hemphill and Baxter have yet to be charged, although the FBI searched their homes last February and retrieved multiple items allegedly bought with embezzled funds.

And then there’s the bank. The WTU did most of its banking at Independence Federal Savings Bank. The forensic audit indicates that personnel at Independence Federal engaged in "unusual actions," such as regularly honoring checks made out to Holmes when the original payees had clearly been altered, as well as paying at least one check written on the WTU’s account when the authorized signature was blatantly forged. However, the audit report stops short of concluding that anyone at the bank personally benefited from what it termed "suspicious" transactions.

Last January, with the results of the forensic audit in hand, the AFT sued Bullock, Hemphill, Holmes and the others allegedly involved in the massive embezzlement scheme to try and recover funds misappropriated from the WTU. Although the AFT did not originally sue Independence Federal, it later amended its complaint and added the bank as a defendant.

A few weeks later, as news of the scandal reached a crescendo in the press, the bank issued a letter to its customers, stating: "The Board of Directors assures you that to date we have no knowledge of any improper conduct by Independence Federal or its personnel in its handling of the WTU account. Moreover, we are conducting our own internal investigation in this matter to determine, to the extent possible, what occurred in connection with the account. Please know that, as a witness to activities in the WTU account we are cooperating fully with the U.S. Attorney’s office investigation."

Three months later, in June, the bank issued a press release announcing that bank president Donna Shuler, chief operating officer Neville Campbell-Adams and chief financial officer Kathleen Kearney had all resigned. No reason was given for their departures.

A. Scott Bolden, the attorney representing Independence Federal, said in a telephone interview that the bank "is not a subject or a target of any investigation."

"The bank is only a witness," Bolden said.

Thomas L. Batties, the bank’s acting president, confirmed that the bank is "cooperating fully with the investigating authorities."

AFT spokesman Alex Wohl said the union considers the bank to be the WTU’s best hope of recovering a substantial portion of its money.

"The bank is the only ‘deep pocket,’" Wohl said. "We may be able to recover some money from the sale of the merchandise bought with the embezzled funds, but that would only be pennies on the dollar. The bank has liability insurance to deal with this type of conduct on the part of its employees. The problem is, the bank is waiting to see who it has to deal with."

That’s because, at the moment, the bank has to deal with two different litigants. Nathan Saunders, a WTU member who teaches at Anacostia Senior High School, filed his own lawsuit. He sued Bullock, Hemphill and the others. But he also sued the AFT.

Saunders said he brought his suit because the AFT knew for years that something was amiss at the WTU and did nothing about it. He alleges in his complaint that officers at the AFT knew that the WTU was chronically behind in its per capita payments to the national office and had not turned in an internal audit – as required by the AFT constitution – in more than four years.

Bullock herself served as a member of the AFT executive council, where, Saunders said in an interview, "Some of these people at the national level could’ve easily seen she was living beyond her means." His suit contends that the AFT’s lack of intervention allowed Bullock, Hemphill and the others to steal with impunity.

Wohl does not dispute that the WTU was behind in its per capita payments or that the WTU had failed to comply with the requirement to turn in an audit.

"The problem was, until we adopted some changes after this all came to a head, the national did not have the authority to force a local to do an audit," Wohl said. "We are a federation. The locals have a lot of autonomy."

He also said that it was "pretty normal" for a local to be behind in its per capita payments and that the AFT has already returned to individual D.C. Public Schools teachers the money that the WTU illegally deducted from its members’ paychecks last year.

Both Saunders and the AFT allege, among other things, that the defendants engaged in conversion, fraud, negligence, conspiracy and violations of the Racketeering Influenced and Corrupt Organizations Act (RICO).

Why RICO?

"Two words: treble damages," Saunders said. "WTU needs its resources to focus on the fundamental issues of education and student achievement. The union should be a voice for teachers in the classroom, and not preoccupied with other issues. The AFT said to the WTU, ‘Don’t worry, we’ll handle it.’ But the AFT holds everyone responsible but themselves."

Last April, the AFT and the other defendants in Saunders’ action filed motions to dismiss his case, claiming that he did not have the authority to sue on behalf of the union and that the national union had no duty, as a matter of law, to oversee the finances of its local affiliate. U.S. District Court Judge Emmet G. Suillvan has yet to rule on the motions. Saunders’ attorney confirmed that the case against Independence Federal has been stayed pending the judge’s ruling on the motion to dismiss.

"The case has generated a lot of interest because of the magnitude of the issue — the accountability of national unions to local members," said Saunders, noting that the AFL-CIO has intervened in his lawsuit in support of the AFT’s position. The AFT is affiliated with the AFL-CIO.

The case has also generated friction between the U.S. Department of Labor and the AFT. Secretary of Labor Elaine Chao issued a press release regarding Bullock’s guilty plea, stating, "Today’s action demonstrates that there are serious consequences for violating the bond of trust between unions and their members. And the Department’s new financial transparency rules will ensure that sacred trust is fully protected."

The AFT, in its press release, countered: "It is unfortunate that the Department of Labor has chosen to use this case as an excuse to justify its new regulations for labor unions."

Questions also remain about the extent of the overlap between Democratic Party politics and missing WTU funds. Hemphill, in addition to co-chairing the mayor’s re-election campaign, worked as a staff member for the local Democratic Party before the WTU scandal broke.

The forensic audit reported that the WTU made an unauthorized donation of $2,000 to Hillary Rodham Clinton’s U.S. Senate campaign and an unauthorized donation of $9,000 to the Democratic National Committee. Both contributions were returned at the request of the AFT.

Independence Federal attorney Bolden, who is chairman of the D.C. Democratic State Committee, asserts "there is no relationship between the WTU scandal and the D.C. Democratic Party." When asked about whether some of the WTU’s funds ended up in the local Democratic Party treasury, Bolden said: "Some of the players are similar, but the party is, at best, a witness."

Kathryn Pearson-West, an at-large member of the state committee, agreed with Bolden’s assessment.

"We got rid of [Hemphill]....We performed an internal audit. There is no connection between what happened at the union and the D.C. state committee," she said.

Last January, the D.C. Office of Campaign Finance announced that it was opening an investigation of the Committee to Re-Elect Tony Williams for, among other things, the failure to report contributions from the Washington Teachers’ Union. The decision to open an investigation was based on published reports that the WTU paid more than $20,000 for a reception in honor of Mayor Williams’ chief of staff, Kelvin J. Robinson. The party was held at Hemphill’s home in Northwest Washington during the summer of 2001.

But that investigation has not gotten very far, said Kathy Williams, a staff attorney at the campaign finance office who is not related to the mayor, because it is difficult to conduct a civil investigation when there is an ongoing criminal probe.

"We just hit a brick wall when we’re talking to people," she said. "So for now it’s pretty much all in the hands of the U.S. attorney’s office."

At several recent public meetings, disgruntled D.C. teachers have loudly demanded an investigation by the D.C. City Council or other authorities into the mayor’s close relationship with Hemphill, Bullock and the WTU. Hemphill’s husband, Larry, resigned from the mayor’s executive staff shortly after items were confiscated from his home as part of the WTU investigation.

"I would not be surprised if the U.S. attorney’s office is looking into the relationship between the former officers here and the mayor’s office," said George Springer, the AFT-appointed administrator who was put in place to run the Washington local until new elections are held. "I’m sure that’s part of what the FBI is doing — asking those kinds of questions."

Copyright 2003, The Common Denominator