The Government's Investigation of the International Brotherhood of Teamsters' Pension Funds

In 1978, GAO undertook a comprehensive review of the adequacy and effectiveness of the Department of Labor's investigation of the International Brotherhood of Teamsters' Central States, Southeast, and Southwest areas Pension Fund, including its coordination with the Internal Revenue Service (IRS) and the Department of Justice. Despite apparent benefits, Labor's investigation and subsequent Labor-IRS dealings with Fund trustees had significant shortcomings and left unresolved problems. Therefore, GAO questioned whether the benefits obtained amd improvements imposed by the Government would result in lasting reforms without the continued diligent efforts of Labor and IRS. Labor's objective of having a Government-wide coordinated investigation did not succeed because IRS refused to participate in a joint investigation. This IRS action disrupted Labor's investigation and also adversely affected the Fund's cooperation with Government investigators. Labor's investigation narrowly focused on real estate loans at the expense of other areas of alleged abuse and was hampered by poor management, ineffective internal coordination, and staffing problems. Notwithstanding memorandums of agreement to coordinate their efforts, Labor and Justice had continuing coordination problems which restricted the flow of information from Labor to Justice. Labor and IRS did not require a written agreement in restoring the Fund's tax-exempt status and had no part in selecting the Fund's new trustees. GAO believes that the Labor and IRS findings of mismanagement and abuse by the former trustees and the IRS action of removing the Fund's tax-exempt status gave the Government a strong bargaining position and an advantage in its dealings with Fund officials. However, in the final negotiations, Labor and IRS may not have gained lasting reforms and improvements to the Fund's operations or removed the influence and control exercised by the former trustees. Despite efforts by appointed independent investment managers, the trustees have attempted to reassert control over the Fund's assets and investments. Both agencies have renewed their investigations, but the investigations will not cover all of the potential areas of abuse and mismanagement by the former trustees. GAO believes that both Labor and IRS need to take heed of the coordination problems and shortcomings in negotiations with the Fund in the original investigation to assure that these mistakes are not repeated.