Summary
describing off the books payments to carpenters, without proper wages or benefits, as a form of "corruption of the job site"
Summary of this case from U.S. v. District Council of New York CityOpinion
90 Civ. 5722 (CSH) (THK).
October 25, 2007
MEMORANDUM OPINION AND ORDER
There is presently pending before the Court, on remand from the Court of Appeals, the question of an appropriate remedy for the District Council's contempt of the Consent Decree, as adjudicated by the Second Circuit, in a summary order reported at 2007 WL 1157143 (2d Cir. Apr. 18, 2007), with which familiarity is assumed.
Prior submissions by the government, the District Council, and the Intervenors (contractors' associations and parties with the District Council to the CBAs in question), make their opposing views perfectly clear. The government asks the Court to invalidate the Request System contained in the CBAs, and reinstate the 50/50 Rule and the Job Referral Rules, which all parties agree the Request System eviscerated. The government also seeks to eliminate contractors' requests altogether, or in the alternative to count such requests against a contractor's 50/50 share. The District Council and the Intervenors ask the Court to allow the Request System to continue to operate undisturbed.
The Court has held, over objections made principally by the Intervenors, that in advance of a plenary hearing or bench trial on the remedy issue, the government is entitled to pretrial discovery relating to that issue, particularly with respect to affidavits and declarations submitted by officers of the Intervenors in support of their successful motions to intervene or directly addressing the remedy issue. The Court's opinion, with which familiarity is also assumed, is reported at 2007 WL 2324388 (S.D.N.Y. Aug. 14, 2007) (the "August 14 Opinion"). The discovery is being supervised by Magistrate Judge Katz.
A dispute has arisen which, despite my undiminished confidence in Judge Katz, I conclude should be resolved by this Court. Specifically, the government asks the Court's permission "to conduct discovery into issues pertaining to whether Joseph Olivieri and other officers of the Association of Wall-Ceiling and Carpentry Industries (`WCC') have connections to organized crime or otherwise have engaged in corrupt activities." Government letter dated August 23, 2007 at 1. Counsel for this Association (one of the Intervenors) object to this request in a letter dated August 28, 2007. To resolve this dispute, it is necessary to consider again the rules governing discovery, and the circumstances giving rise to the present dispute.
Rule 26(b) of the Federal Rules of Civil Procedure defines the scope and limits of discovery. Rule 26(b)(1) provides in part:
For good cause, the court may order discovery of any matter relevant to the subject matter involved in the action. Relevant information need not be admissible at the trial if the discovery appears reasonably calculated to lead to the discovery of admissible evidence. All discovery is subject to the limitations imposed by Rule 26(b)(2)(i), (ii), and (iii).
Rule 26(b)(2)(C) provides in part:
The frequency or extent of discovery otherwise permitted under these rules and by any local rule shall be limited by the court if it determines that: . . .
(iii) the burden or expense of the proposed discovery outweighs its likely benefit, taking into account the needs of the case, the amount in controversy, the parties' resources, the importance of the issues at stake in the litigation, and the importance of the proposed discovery in resolving the issues.
The August 14 Opinion, in considering the propriety of discovery under Rule 26, concluded that "the fashioning of an appropriate remedy constitutes the `subject matter involved in the action,' as that phrase is used in Rule 26(b)(1), and `the issue at stake in the litigation,' as that phrase is used in Rule 26(b)(2)(C)(iii)." 2007 WL 2324338, at *6. To address that underlying issue, the August 14 Opinion allowed the government discovery into the Intervenors' professed ignorance during CBA negotiations. I reasoned that if "the Associations were aware that a court decision (by this Court or the Court of Appeals) might invalidate the Request System and took a chance anyway, this is as circumstance that might impact upon the Associations' right to request a particular remedy." Id. at *7. The Opinion also allowed the government discovery into "[t]he allegedly disastrous economic effect of eliminating the Request System," an effect that "is now squarely before the Court; the Associations proclaim it from the rooftops; and the government is entitled to discovery on the issue." Id. at *8.
These two factual issues — the state of the Associations' knowledge during the CBA negotiations and the economic effect of invalidating the Request System — are bound up with a third. The government has contended from the start that the Request System leads to what the government calls "corruption of the job site." An extended discussion of this asserted effect appears in the government's brief dated August 10, 2005, in support of its contempt motion, at 12-18. The government argued that "[t]he widespread use of the request system is not only unfair to the carpenters who sit for months on the out-of-work list without work, but it also leads to corruption of the job site." Brief at 15. For these propositions, the government relied upon the Request System Report dated November 5, 2004 authored by Walter Mack, the Court's former Independent Investigator (the "Mack Report"), which found after extensive inquiry, examination of documents, and depositions of subpoenaed witnesses that "the request system as it currently operates nurtures abuse and corruption of the job site" because "lengthy waits for jobs that are often short-term (as contrasted with the choice jobs offered to contractors' selectees), make it extremely difficult if not impossible . . . to fend off violations of the CBA." Brief at 16 (internal quotation marks omitted). The government's brief continued:
Given the lengthy wait carpenters face on the out-of-work list, they often do not have a realistic choice to refuse contractors' demands that they be paid off the books. Indeed, the corruption potential presented by the request system is vividly illustrated by Mr. Mack's recent investigative report concerning Boom Construction. As Mr. Mack reported, Boom routinely paid its carpenter force in cash, off the books, in order to disguise the fact that the wages they were paying were significantly below the rate mandated by the collective bargaining agreement and to avoid paying fringe benefits. . . . That carpenters beholden to contractors for employment are more likely to engage in or tolerate corrupt job-site practices is demonstrated by the evidentiary record. Carpenter Jeremiah Casey of Local 608 agreed to work off the books for Boom Construction because "you're not going to get hired or you won't be kept if you didn't go `off the books' when you were asked". . . . This fear of being laid off and facing a long wait on the out-of-work list led several Boom carpenters to perjure themselves at deposition by falsely denying they had worked off the books. . . . In light of this evidentiary record, Mr. Mack found the job referral provisions of the Consent Decree to have been eviscerated. As Mr. Mack understood it, "the purpose of the job referral provisions was not only to eliminate simple unfairness, but also minimize the potential for abuse and corruption." Yet thanks to the request system, the job referral rules — as they now operate — not only fail to minimize the potential for corruption, but the rules actually encourage job-site corruption, Mr. Mack found.Id. at 15-18 (some internal quotation marks and ellipses omitted).
The papers submitted by one of the Intervenors, the Association of Wall-Ceiling and Carpentry Industries ("WCC" or "WCCI"), include a response to the government's theory that the Request System leads to job site corruption, as that concept is defined by the government's brief. Joseph Olivieri submitted an affidavit sworn to on May 8, 2007. The August 14 Opinion summarized his affidavit as follows:
Joseph Olivieri is the executive director of The Association of Wall-Ceiling Carpentry Industries of New York, Inc. ("WCCI"), whose president, Michael Weber, describes in his own affidavit as "an employer association of approximately one hundred forty contractors and sub-contractors engaged in any phase or phases of gypsum drywall construction, acoustical ceiling construction, and/or general carpentry construction doing business in the State of New York." Weber Aff. ¶ 2. Olivieri is also one of the "management trustees" for the District Council's benefit funds, which depend upon contributions mandated by the CBAs from employers. Olivieri's affidavit states that beginning in 1993, the funds' trustees have engaged in "a concerted effort to eradicate corruption," Olivieri Aff. ¶ 3, and goes on to describe the particulars of that effort, ¶¶ 4-8.2007 WL 2324338, at *2.
The brief of WCCI counsel on remedy issues argues: "[T]here is absolutely no nexus between the Request System and an increase in organized crime or corruption within and among the District Council and the Association. If anything, organized crime influence on the industry and corruption generally has greatly decreased since the Government's initial RICO suit that led to the Consent Decree." Brief at 18-19. These reassurances are counsel's ipse dixit; no evidentiary support for them is cited. However, counsel cite Olivieri's affidavit as support for their accompanying assertion that "[g]reat efforts have been made to eliminate corruption in the industry, particularly through the efforts of the [District Council] Benefit Funds," governed by "equal numbers of Management and Union Trustees." Id. at 19. The Olivieri affidavit, at ¶¶ 3-8, summarizes those efforts. They include the retention of former AUSA Stuart GraBois as Executive Director of the Funds, who "has overseen the Funds' anti-corruption efforts in cooperation with the Boards of Trustees and the District Council," ¶ 3; the passing of plan amendments to provide that employees' required contributions to the Funds are "plan assets," with the asserted effect that "employers who fail to make their required contributions will be considered to have breached fiduciary duties," ¶ 4; a proposed amendment to the Welfare Fund providing that participants (District Council members) "found to have accepted cash payments will lose health insurance for themselves, and their families, for up to six months," ¶ 5; the retention of an investigative firm and a technology consultant to review systems and procedures and make recommendations, the rotation of independent payroll audit firms, the implementation of a weekly computerized contributions system, the utilization of a forensic auditing firm "when needed," and the implementation of "a toll-free Hotline for participants to report cash jobs and other failures with respect to the Funds," ¶ 6; requiring "automatic direct transfers from employers to the Funds' accounts," ¶ 7; and directing the law firm of O'Dwyer Bernstien LLP (which represents the District Council) "to aggressively pursue potential fraud in reporting contributions," coupled with the retention of two forensic accountants, ¶ 8.
Whether these efforts "to eliminate corruption" have been or are effective is not before the Court on the government's present application for expanded discovery. But it is apparent that the several efforts and actions described in the Olivieri affidavit are all intended to target the "corruption of the job site" previously identified and described in the government's briefs and the Mack report. And it is only logical that the trustees of the District Council's benefit funds would focus their attention upon that particular form of corruption, namely, contractors paying carpenters in cash and off the books, since that corrupt practice deprives the funds of contributions owed to them by contractors under the CBAs.
In addition to the Olivieri affidavit, the WCCI submitted an affidavit of its president, Michael Weber. The August 14 Opinion discusses Weber's affidavit at length; it was Weber, not Olivieri, who in his affidavit on behalf of the WCCI described the economic hardships that dong away with the Request System would inflict upon union contractors, 2007 WL 2324338, at *2-3, a contention stressed by officers or representatives of other Intervenors, id. at *3-4. In addition, Weber stated in his affidavit that during the collective bargaining negotiations leading up to the CBAs in question the District Council negotiators never discussed the Consent Decree's requirement "that a requested carpenter need to have worked with the employer in the previous six-month period"; that the employer negotiators were not made aware "of the contempt proceedings brought by the Government as a result of the Request system in the CBA"; that during the bargaining for the 2006 CBA "the Association did not know that the Request System was potentially prohibited by the Consent Decree"; and that the Association "was made aware of this case and the potential effect on the associations' collective bargaining agreements only after the Court of Appeals issued its summary order on February 20, 2007." Id. at *3. That asserted ignorance was echoed by another association's officer. Id. at *4 (affidavit of Paul O'Brien of the Building Contractors Association).
Reacting to these statements, the government sought from the Court "the authority to issue document subpoenas and take depositions of the witnesses whose declarations were included as part of the most recent submissions to the Court." Letter dated June 4, 2007 at 1. In support of that request, the government specifically alluded to the affidavits of Weber and Olivieri, asserting as to them:
Such discovery would enable the Government to test the accuracy of statements made by those witnesses, the parties, and the proposed intervenors. As an example, the Association of Wall-Ceiling and Carpentry Industries relies on declarations from its president and executive director. The president, Michael Weber, states that the Association was unaware of the terms this Court's Consent Decree [sic] in this matter prior to February 2007. The executive director, Joseph Olivieri, states that he and the union's benefit fund have been engaged "in a concerted effort to eradicate corruption" since 1993. . . . Discovery will enable the Government to explore the truth of these and other allegations and their relevance vel non to the proceedings now before the Court.Id.
As noted supra, the August 14 Opinion granted the government discovery into the state of the Associations' awareness during CBA negotiations of the government's motion to hold the District Council in contempt, and the economic effect of a remedy abolishing the Request System. But the August 14 Opinion refused to allow the government discovery in another area. The Opinion said:
No present case can be made for allowing the government open-ended discovery into the nature and effect of the efforts of the Associations and management benefit fund trustees to combat union corruption. At least in the absence of any independent showing by the government that these entities may be trying to encourage rather than eradicate corruption, this discovery would resolve itself into a fishing expedition that is not justified on the present record.2007 WL 2324338, at *7.
The government seizes upon the last quoted sentence to support its present application for leave "to conduct discovery into issues pertaining to whether Joseph Olivieri and other officers of the [WCCI] have connections to organized crime or otherwise have engaged in corrupt activities." The government contends that testimony and a plea agreement generated by two criminal cases several years ago furnish "[a] sufficient basis for such discovery," given "the broad and liberal discovery rules" which require "only a minimal showing" to establish "the ability to proceed for discovery." Government's August 23, 2007 letter at 1, 2 (citation omitted). In support of that latter proposition, the government relies upon Rule 26(b)(1), quoted supra, which permits discovery into "any matter relevant to the subject matter involved in the action" if "discovery appears reasonably calculated to lead to the discovery of admissible evidence." Given these assertions, it is necessary to consider in detail the evidence upon which the government's application depends.
The first of the two criminal cases in question is United States v. Amicucci, No. 04 Cr. 1321 (S.D.N.Y.), tried before Judge McKenna. The government's August 23 letter encloses pages 799-802, 879-882, 927-930, and 975-978 of the trial transcript. Those pages contain excerpts from the testimony of two cooperating government witnesses, Joseph Rizzuto, Sr., and Joseph Coriasco, identified by the government as sometime business agents of Local 14 of the International Union of Operating Engineers and (in Coriasco's case) an affiliate of the Colombo organized crime family. Rizzuto testified that on one occasion Joseph Olivieri conveyed a threat of harm to Rizzuto on behalf of the Genovese organized crime family, and on another occasion Olivieri described a monetary scheme to Rizzuto in which organized crime was interested. Rizzuto's testimony on the point is summarized by this exchange: "Q. [by the government] And who is Joe Olivieri? A. He represented the wise guys. He was the communication between the union and the wise guys." Tr. 881. Consistent with that characterization, Rizzuto also testified that with respect to the appointment of an assistant business manager for the local union, Olivieri "insisted that I meet with a fellow by the name of Lou Muscatel who apparently was a boss with the Genovese family." Tr. 801. Rizzuto described the meeting that subsequently took place, Tr. 880, and it appears that the correct spelling of this individual's last name is "Moscatiello," not "Muscatel"; Rizzuto agreed with the prosecutor's description of Moscatiello as "a Mafia connected guy." Tr. 880.
Coriasco testified that the Genovese crime family controlled Local 14, Tr. 929, and that a "Rudy Oliveri" (according to the government, a nickname Joseph Olivieri used) acted as one of several "messenger boys" to Coriasco from Fat Tony Salerno, a Genovese family captain. Tr. 975.
The second criminal case to which the government refers is United States v. Louis Moscatiello, No. 03 Cr. 229, No. S5 03 Cr. 229 (S.D.N.Y.), assigned to Judge Buchwald. Presumably this is the same Louis Moscatiello referred to in Rizzuto's testimony in the Amicucci trial. The government's August 23 letter encloses a copy of a plea agreement letter dated October 12, 2004 ("the plea agreement"), entered into between Moscatiello and the government. It appears from the plea agreement that Moscatiello was allowed to plead guilty to Counts One, Two, Three and Eight of the original indictment and the two counts of a superseding information. The plea agreement summarizes the counts to which Moscatiello is pleading. The four counts in the indictment all charged Moscatiello with violating the RICO statute by extorting Local 14 for the purpose of appointing particular individuals to jobs, including the assignment of "preferential and/or no-show union jobs to numerous individuals selected by and associated with the Genovese Organized Crime Family." Count Three of the indictment, as summarized in the Plea Agreement at 2. The other three counts in the indictment to which Moscatiello pleaded all relate to the assignment of one Carl Carrara as a master mechanic at a job site in New York City.
Moscatiello also pleaded guilty to both counts in the superseding information. Count One of the information charged Moscatiello with participating in a conspiracy to commit employee benefit plan embezzlement and mail fraud by allowing contractors who had signed CBAs with Local 530 of the Operative Plasters and Cement Masons Union to violate the CBAs by "paying workers off-the-books, employing non-union workers, not paying workers union-scale wages, and misrepresenting the number of workers on reports submitted to Local 530 and the Local 530 employee benefit funds." Plea Agreement at 3.
I pause to observe that the evidence of criminal activity discussed thus far has no direct reference or relationship to the subject matter involved in the present action before this Court or the issues at stake in the litigation, as previously defined. Therefore there is insufficient reason to suppose that further inquiry by discovery into that conduct or those events would lead to evidence that would be admissible in a plenary trial of those issues.
But that cannot be said of Count Two in the superseding information, to which Moscatiello also pleaded guilty. The Plea Agreement at 3 describes that count as follows:
Count Two of the Superseding Information charges the defendant with participating in a conspiracy, from in or about October 1999, up to and including April 2001, through his membership in the Genovese Organized Crime Family, to commit employee benefit plan embezzlement and mail fraud, and to make false statement in ERISA documents, by allowing a contractor who had signed a collective bargaining agreement ("CBA") with the District Council of New York City and Vicinity of the United Brotherhood of Carpenters and Joiners (the "District Council") to violate the terms of that CBA at the Kings County Hospital expansion project by, among other things, paying workers off-the-books, employing non-union workers, not paying workers union-scale wages, and misrepresenting the number of workers on reports submitted to the District Council and the District Council employee benefit funds. . . .
Thus, Moscatiello pleaded guilty to precisely the sort of job site corruption involving District Council carpenters upon which the government focuses in the present litigation; and there is testimony by a witness in the Amicucci trial that Olivieri, knowing of Moscatiello's organized crime position, pressured the representative of a union (although not a carpenters' union) to meet with Moscatiello.
Of course, it must be clearly understood that in this opinion the Court is not saying that the cited testimony connecting Joseph Olivieri to organized crime is credible, or that Mr. Olivieri is or has been anything other than an honorable and law-abiding citizen. However, under the discovery rules the government will be entitled, if it deposes Olivieri, to inquire about Olivieri's knowledge, if any, of and contacts, if any, with Louis Moscatiello or other organized crime figures, with reference to that specific "corruption of the job site" targeted by the government and involving carpenters belonging to one of the District Council's constituent local unions. Such an inquiry may lead to the discovery of evidence that would be admissible at an evidentiary hearing or plenary bench trial on the underlying issues in the case.
Except to that limited extent, the government's application to conduct discovery into whether Mr. Olivieri "and other officers" of the Association "have connections to organized crime or otherwise engaged in corrupt activities" is denied. The government has failed to show that such broad and open-ended inquiries are permissible under Rule 26.
If at a plenary bench trial on the remedy issue, the District Council or the Intervenors called Olivieri as a witness to describe the benefit funds' trustees' efforts to combat the particular sort of job site corruption relevant to the case, the government might seek to cross-examine Olivieri on the basis of the evidence of criminal conduct the government relies upon in its present discovery application. The propriety of such cross-examination at trial would depend upon the provisions in the Federal Rules of Evidence concerning the boundaries of permissible cross-examination to test the credibility of a witness, as well as the balancing required by Fed.R.Evid. 403. I intimate no present view about how the Court would resolve those questions if presented with them at trial.
It is SO ORDERED.