Welfare Fund Waste

Unions Spend Millions in City Dollars on Patronage Contracts and Expense Excesses

"It's a useless contract, a complete waste," said Jimmy Boyle, the two-time president of the Uniformed Firefighters Association, who launched what he now regards as a multimillion-dollar misadventure almost 19 years ago. "It should be gone."

Boyle was talking about his decision in 1984 to give "a kid doctor" named Marc Grodman a union welfare fund contract, paid for by the city, to send a medical van from firehouse to firehouse giving UFA members physicals as well as stool, pulmonary, and blood tests. An estimated $6 million later, the boondoggle is still rolling on, as much a symptom of the abuse of these health funds as it is a diagnostician of firefighter symptoms.

Reforming and gaining control over the 104 union funds that collect over $800 million a year in city subsidies has become a goal of the Bloomberg administration, whose labor commissioner, Jim Hanley, is seeking ways to attain $600 million in budget-balancing concessions from labor. As much as $150 million could be saved if the city centrally administered these funds under a joint union-management board (see "What the Unions Can Do" in the March 5-11 Voice).

A legendary union leader whose son Michael died at Ground Zero, the 64-year-old Boyle says he decided to give the no-bid contract to Grodman's company, Med-Mobile Inc., at the urging of Grodman's older brother Joel, a pharmacist who controlled the UFA's prescription drug plan. Boyle was looking for data to justify state legislative passage of a cancer bill for firefighters, and he thought Grodman's exams might help him prove firefighters were so disproportionately contracting cancer that they were entitled to full, job-related disability pensions if they got it.

"We eventually got the cancer bill," said Boyle, but not until the after he completed his second term as UFA president in 1993. "It all came down to politics. I don't think we even used Grodman's data. We got some data from Mount Sinai Hospital."

The last audit of the UFA's active and retiree funds—completed by City Comptroller Elizabeth Holtzman in 1991—blasted fund officials for "not adequately monitoring" Med-Mobile, to which they'd paid $1.5 million between September 1984 and July 1989, all of it part of the city's per-member welfare contributions. Though the audit said the contract "required Med-Mobile to submit annual reports on members' health status and the effects of hazardous exposures and working conditions," the company hadn't filed one since 1995. The UFA asked for the reports in August 1990, but didn't get them.

Auditors noted that even though the UFA was "unaware whether Med-Mobile was achieving its objective of documenting the health dangers," it approved a 25 percent increase in the payments to the company in August 1989. While the UFA did not return numerous calls, Marc Grodman, who changed the name of the company to Bio-Reference Laboratories Inc. (BRLI) in 1989, told the Voice that he has never submitted annual reports.

"It was not my understanding that reports were due," said Grodman. "I made presentations to the UFA board on the health status of the members." Boyle, who's sure that reports were required, said Grodman "did not really make presentations to the board" while he was president. Grodman added that the contract is now with him personally, not the company, but he acknowledged that he is never aboard the traveling van, saying technicians do the tests and he "reviews the results." He declined to offer any data on company services to the union over the years, insisting that the reason the UFA maintained the contract was "to access quality care for firefighters on a confidential basis" that would not be available to the FDNY.

The department, however, has itself recently entered into contracts with BRLI totaling $6.6 million, one of which offers testing at "clinic-based facilities" similar to what the UFA offers in the van. The first FDNY testing contract, announced August 29, 2001, costs nearly $5 million over five years, while a three-month supplemental agreement was reached after 9-11, requiring the testing of firefighters for PCB and heavy-metal contamination after the attack. Sean Johnson, an FDNY spokesman who's also a firefighter, raved about the well-known medical care that employees get directly from the department, saying, "We have our own surgeons, orthopedic, X-ray facilities, MRI capabilities" that "cover everything from a cold to a job-related injury."

With an annual physical and the BRLI contract, Grodman could not explain just what unique services the UFA was getting.


Last week's story on these funds stressed the $750 million in pharmaceutical-benefit-manager contracts steered to one company by Roz Yasser, the administrator of the District Council 37 Benefits Fund. Since then, the Voice has obtained a copy of a confidential investigative report prepared by the top accounting firm KPMG, which sheds some light on the shenanigans at the city's largest municipal-union fund. The standard wisdom since the scandal at DC 37 exploded in 1998 is that the fund must have been clean, since the 38 indictments engulfed the union, not the fund.

While making it clear that it took only a cursory look at the fund, the KPMG report, paid for by the American Federation of State, County and Municipal Employees (AFSCME), revealed that Yasser was paid $588,124 between 1995 and 1998 as well as $85,297 in car, travel, and meal expenses. Her totals put her in the union's top three spenders in all categories, the only person whose expenses were subsidized by the city. Noting that "no expense vouchers were completed to document the business purpose of Yasser's charges," KPMG identified over $1500 in charges that were personal and had never been reimbursed by Yasser, including plane tickets for her husband and two sons to Florida and Austin, Texas.

The report also detailed how Ralph Pepe, who worked for Yasser's fund and managed the building it owned at 125 Barclay Street, awarded two construction-manager contracts to a company shrouded in scandal, Herbert Construction. Not only was the company's president under indictment, but one of its chief salesman, Anthony Scotto, was a convicted racketeer and Gambino crime family soldier who once ran the city's longshoremen's union. Bert Perkel, who was the counsel to the DC 37 fund at the time the $335,596 in contracts were awarded, between 1995 and 1997, had once been Scotto's lawyer.

Yasser left the fund last Spring to go to work for HIP, one of the city's top health care providers, which also had millions in contracts with the DC 37 fund she ran. Representing the union on the HIP board for 20 years, Yasser billed the fund for parking at 27 different HIP meetings between '95 and '98, more than any other parking submission. Randi Weingarten, the teachers union president who heads the Municipal Labor Committee overseeing all city unions, conceded that Yasser had helped prepare an April 2002 request for proposals for a still pending $1.6 billion—a year—medical and hospital plan for all city employees. A HIP spokesman confirmed that Yasser nonetheless "participated in helping the staff of HIP to reply to the RFP and was one of 15 HIP staff who attended the first presentation HIP made." before the joint MLC-city selection committee for the five-year contract.

Yasser was asked to resign by DC 37 around March 1, but did not leave until May 31. Bids on the RFP were due April 3, yet HIP says Yasser worked on its response while she was still on DC 37's payroll. As the longtime chair of MLC's health committee, Yasser's two hats cloud this extraordinarily expensive bid process, leaving open the possibility that she might have been in a position to become familiar with the proposals of HIP's major competitors.

While this contract does not involve welfare funds—which are designed to supplement the benefits of this core medical and hospital plan—Yasser's questionable conduct is just one more indication of how blurred the conflict-of-interest lines have become in the netherworld of city-union business. If Yasser were a city employee, she could not legally appear before an agency she'd just left, a bar designed to prevent collusive contracts.


Research assistance: Cathy Bussewitz, Alexa Hinton, Felicia Mello, Solana Pyne, E.B. Solomont, and Steven I. Weiss

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