A Little Graft Can Do A Lot of Damage

The real price tag of Carpenters union corruption

On Monday, former Michigan Carpenters President Ralph Mabry pleaded guilty to accepting kickbacks. The actual value of the kickbacks was modest, about $10,000 in charitable donations mainly, and one might be tempted to dismiss this as penny-ante stuff. That would be a mistake; Mabry's vulnerability to small bribes is liable to have a big price tag for unionized Michigan carpenters.

The details of all the goings-on between union boss, “investment consultants,” politicians and dubious charities is all a little overwhelming, so I won’t try to go into all the complexities here, but there’s one little corner of the spaghetti tangle that deserves highlighting, because it illustrates how damaging union corruption can actually be.

Ralph Mabry’s benefactor was one John Orecchio, a Chicago businessman who owned AA Capital Partners. In return, the Carpenters union invested $77 million with AA Capital. AA Capital proved to be a poor choice; Orecchio himself embezzled $24 million from various union pension funds. To the extent Orecchio did any actual investing, the choices were often disastrous: a $32 million investment in a sports drink company (headed up by a twice-convicted felon, which should have been a tipoff) went belly-up, with investors recouping only $9 million.

The Carpenters pension fund, for its part, is severely underfunded; at the end of 2009 the fund had little more than half of the assets needed to cover its obligations. Losses suffered at the hands of Orecchio and AA Capital certainly don’t help matters.

To put it bluntly, union carpenters throughout the state would be far better off if Mabry had dipped into the pension fund himself; his payoff was trifling compared to the millions of dollars that were taken from the union. 

There’s a warning in this for union members, too. What looks like petty corruption may just be the tip of the iceberg; the thousands of dollars in gifts that a white-collar criminal uses to curry favor with union bosses could mean millions of dollars lost for the rank-and-file.