Government's Investigation of the International Brotherhood of Teamsters' Central States, Southeast and Southwest Areas Pension Fund

Gao ID: 113126 August 25, 1980

GAO reviewed the government's investigation of the International Brotherhood of Teamsters' Central States, Southeast and Southwest Areas Pension Fund. The Fund's trustees have been subject of controversy and allegations of misusing and abusing the Fund's assets. Allegations included charges that individuals linked to organized crime had connections with the Fund and questionable loans had been made by the trustees to people linked to organized crime. Both the Department of Labor (DOL) and the Internal Revenue Service (IRS) have investigated the Fund and found evidence that the former trustees and officials of the Fund failed to prudently carry out their fiduciary responsibilities and had not operated the Fund for the exclusive benefit of beneficiaries. The IRS revoked the Fund's tax-exempt status, both agencies demanded reform of the Fund's operations, and DOL filed a civil suit against 17 former trustees to recover losses from alleged mismanagement. GAO review dislosed shortcomings and deficiencies in DOL investigative efforts, interagency coordination, DOL and IRS dealings and agreements with the trustees in reforming the Fund, and DOL and IRS monitoring of the current trustees operations and compliance with the conditions of requalification. Despite a good performance by the newly appointed independent investment managers of the Fund, the trustees of the Fund attempted to reassert control over the Fund's assets. The Fund's trustees still control all of the monies the Fund receives and decide how much should be retained for benefits administration and how much given to the managers for investments. IRS should closely monitor the financial status of the Fund to ensure that it meets the funding standards in 1981 and in future years. Problems remain to be resolved with the Fund. There are questions as to whether the agreements for reforms to the Fund's operation will be long lasting. The need to renew the investigation was caused by DOL and IRS shortcomings. The results of DOL and IRS investigations gave the government a strong bargaining position in its dealings with Fund officials. However, in the final negotiations with the trustees, both agencies failed to gain lasting reforms and improvements to the Fund's operations and remove the influence and control exercised by the former trustees.

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