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Independent Financial Auditor (IFA)

The Independent Financial Auditor ("IFA") reviews and must approve all expenditures by the International Union under the terms of an agreement signed by the previous administration in December 1997. The agreement gives the IFA authority to review any expenditure of International Union funds and to veto any expenditure the IFA "reasonably believes" would be unlawful or would violate the IBT Constitution.

The agreement was implemented because the United States Attorney believed circumstances in December 1997 required independent review of expenditures to prevent any repetition of the illegal schemes that led the Election Officer to overturn the 1996 Election of International Union Officers. The 1996 Election was overturned because of several schemes in which hundreds of thousands of dollars in International Union funds were embezzled, laundered and, along with other illegal contributions, used to support the re-election campaign of former General President Ron Carey. The former General President was subsequently barred from participating in the Rerun Election. In December 1997 he took an indefinite leave of absence after being charged by the Independent Review Board for his role in these schemes. The charges were sustained, and he was permanently barred from the Union.

The leave of absence left the Union’s financial affairs in the hands of a single International Union officer, then General Secretary-Treasurer Tom Sever, who had been elected with former General President Carey and whose own election had to be rerun as a result of the illegal contributions.

The United States Attorney selected KPMG, a "Big Five" accounting firm to act as the IFA. Ellen Zimiles, a partner in the firm’s New York office, is currently in charge of IFA review of the Union’s expenditures. The December 1997 agreement requires the Union to pay KPMG’s fees and expenses. Through the end of calendar 1999, the Union has paid a total of $1,557,360.55 to KPMG for its IFA functions: $646,261.20 in 1999, $845,691.35 in 1998, and $65,408.00 in 1998. The Union continues to pay approximately $50,000 to $60,000 each month for this review.

The circumstances justifying the imposition of the IFA ended with the certification of the December 1998 rerun election. The Union now has two elected officers - the General President and the General Secretary-Treasurer - who each independently review and approve every expenditure of International Union funds. The new administration independently commissioned the Thomas Havey Company to review study and strengthen the Union’s internal financial controls. Despite the certification of the rerun election, implementation of the revisions recommended by Thomas Havey, and the fact that the Department of Labor approved the International Union’s financial practices after a recent ICAP audit, the United States Attorney has refused to end IFA review until the Union’s internal financial controls have been reviewed by a "Big Five" accounting firm. The Union has engaged Arthur Anderson, and the firm is in the process of conducting its review. The Union continues to negotiate with the United States Attorney for an agreement to end the IFA.


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