The Teamsters Club in Fargo, N.D., has been a money loser, propped up by subsidies from its owner, Teamsters Local 120.
But red ink aside, the bar allegedly managed to pay more than $1,000 a month in stipends to two key members of its oversight board, Brad Slawson Sr. and Brad Slawson Jr.
The Slawsons were each drawing six-figure salaries as the top two executives of Local 120, a prominent, multistate union based in Blaine. The local's 11,661 members didn't know the Slawsons were also getting paid by the Fargo bar.
The payments are among scores of financial improprieties that are alleged in a review board's investigative report on Local 120, from thousands of dollars of missing booze at the Teamsters Club to a $90,000 finders fee that a Slawson family friend received in connection with a new union hall in Blaine.
On Nov. 13, the Slawsons were booted from their posts, at least temporarily, by the Teamsters international union, and Local 120 was placed into emergency trusteeship. The international took over Local 120 after an investigation by the Teamsters Independent Review Board.
"There is evidence that the secretary-treasurer (Slawson Sr.) and the president (Slawson Jr.) are corrupt and incompetent, the Local is engaged in financial malpractice and is not being conducted in the best interests of its members," the review board alleged in a 139-page report. [Click here to download that report from www.TDU.org.]
The Slawsons are on an unpaid leave of absence. Slawson Sr., a nationally known Teamsters leader, and his son declined to comment for this story.
An internal Teamsters hearing on the allegations is expected within 30 to 60 days. Both Slawsons could be barred from holding office with the union.
The Independent Review Board is commissioned partly by the U.S. Justice Department to root out corruption nationwide in the Teamsters union. The review board grew out of a 1989 consent decree the Teamsters signed with the Justice Department to avoid racketeering charges.
At the heart of the board's findings are allegedly questionable money management decisions made by the Slawsons with little or no oversight from the local's executive board or membership.
Payments to friend
For example, a close family friend of the Slawsons got a $90,000 fee for introducing Local 120 to a construction firm that ended up building the new union hall. The Blaine contractor made a $135,000 profit on the deal -- only $45,000 more than the finder's fee. The contractor paid the fee, but it was included in the Teamsters' costs for the building, according to the report.
Slawson Sr. told Independent Review Board investigators that he only learned of the $90,000 fee during the investigation and was surprised by the amount, the report said.
The same family friend who got the fee, Todd Chester, was later hired as a consultant to help shore up the finances of the Teamsters Club. Chester, the father of one of Slawson Sr.'s grandchildren and a friend of Slawson Jr. since high school, had experience running a bar.
But while Chester worked in Fargo, inventory at the Teamsters Club didn't square with sales, causing investigators to conclude there was a diversion of beer and liquor, particularly Captain Morgan rum, the report said. Chester could not be reached for comment.
The investigation also alleged that Local 120 had "sham" contracts with American Pride Home Services, which handled financial services connected with the new union hall.
American Pride was organized by the Teamsters, but its workers had no collective bargaining or seniority rights, staples of any union contract -- though they paid union dues. American Pride itself paid union dues for some workers who had left. The report said Slawson Sr. "actively hawked" the company's products to union members.
The report also concludes that Slawson Jr., a Teamster since 1988, avoided paying a personal debt to two union vendors by promising them more union business. Slawson, 42, had spent at least $560 on buttons and leaflets in a failed bid to be a delegate for Barack Obama at the 2008 Minnesota DFL Convention.
In addition, the report tells of Local 120 officers allegedly spending union money at bars and restaurants for no union purpose. Meanwhile, the local spent $214,755 on sports tickets between 2007 and 2011 -- for the Vikings, Twins, Wild and Gophers hockey team -- but had almost no records indicating the tickets were used for union purposes.
A growing force
Teamsters Local 120 encompasses several industries and particularly represents drivers and warehouse workers. Slawson, 64, was a truck driver in 1970 when he joined the Teamsters. In 1983, he was elected as a business agent -- a full-time union job. He worked his way up the ladder and by 2004, he was Local 120's top officer, an elected position.
During Slawson Sr.'s tenure, Local 120 has grown, absorbing Teamsters locals in Fargo, Des Moines and Dubuque, Iowa, and Sioux Falls, S.D., as well as a local in Minneapolis that represents about 110 mailroom employees at the Star Tribune.
In Fargo, Local 120 inherited the Teamsters Club. The bar has an oversight board whose prime function -- under North Dakota law -- has been to decide which charities receive the tavern's gambling proceeds.
Since 2007, the bar's board members, most of whom have been officers or executives of Local 120, have received a total of $335,832 in stipends, according to the review board's report. Slawson Sr. and Slawson Jr. collected $72,700 and $68,100 respectively.
Partly because of the stipends, Local 120 paid operating expenses for the bar out of its general fund, the report said.
Stipends not authorized
The stipends were never disclosed at a union general membership meeting. Nor were they authorized by the union's executive board, a possible violation of federal law, the review board report said.
The bar was paying stipends at a time Local 120 itself was having financial difficulties, the review board report said. Due to the recession, about 4,000 Local 120 members had been laid off since 2008, erasing about $200,000 a month in union dues, according to federal court records.
In March 2010, Chester was hired as a consultant to the Teamsters Club at an annual salary of $20,622. Chester would hold that post until August 2011, although he filed for personal bankruptcy in November 2010, listing debts just short of $1 million and assets of only $23,320.
In bankruptcy court records, Chester said that in addition to a Teamsters gig, he was manager of Route 65 Pub & Grub in East Bethel.
At the Teamsters Club, Chester devised a strategy to raise sales through "a fake benefit for a non-existent sick baby or other false cause," the review board report said. But the idea was shot down when other bar employees said that it couldn't be done, the report said.
Chester also believed the bar was carrying too much inventory. So he planned to return booze and beer to wholesalers for credit. But the Independent Review Board subpoenaed the bar's wholesalers and found that no inventory had been returned.
The review board analyzed inventory and sales patterns and found a gap -- $236,000 in lost revenue from unaccounted-for beer and liquor. "The conclusion is that inventory was being diverted from the bar's operations," the report said.
"As a bankrupt bar owner with access to and control over the inventory...Chester had both means and motive to remove inventory," it said.
Chester also figured prominently in the choice of a contractor for a new union hall in Blaine. Local 120 had first received a proposal in 2007 from Ryan Cos., a large Twin Cities construction firm, with a guaranteed maximum price of $2.88 million.
Then, Chester brought Blaine-based Stone Construction to Local 120. Stone came in with an original bid that was more than $200,000 cheaper than Ryan's, and the Slawsons advocated switching to Stone, the report said. In an analysis produced by the local, Ryan was described as a union contractor, while Stone was not, the review board's report said.
In the end, Stone built the Blaine Teamsters hall for about $3.2 million. Stone paid Chester $90,000 out of the money it received from the union. The report found that the fee was not an approved cost under the contract between Teamsters Local 120 and Stone, and it was not disclosed to Local 120 in any document.
The review board report noted other potential irregularities concerning the new hall. Stone was supposed to return $26,961 in escrow money to Local 120. Stone hasn't, and Local 120 has made no attempt to collect it, the report said. Stone didn't return calls for comment.