PACT: ProActive Chicago Teachers and School Employees

The Facts about the CTU Financial Crisis

My name is Deborah Lynch.  I am a Chicago public high school teacher and member of the Chicago Teachers Union (CTU), IFT,AFT, AFL-CIO.  I am currently an elected CTU delegate for Gage Park High School.  I am also the past president of the CTU (2001-2004). 

I lost the 2004 CTU election to current CTU president Marilyn Stewart in a contentious, disputed election, by 600 votes out of 24,000 (51% to 49%). The AFT, the national affiliate of the CTU, dismissed claims of vote fraud and ruled Stewart, a member of the ruling AFT party, who was represented by the AFT’s own lawyer, the winner.  Stewart’s vice president, who is currently being ousted by Stewart, claims her team spent $200,000-300,000 on that election, giving credence to suspicions that AIG Corporation bankrolled their election in exchange for an exclusive CTU endorsement and subsequent millions of dollars in business.   I ran against Stewart again in 2007 and lost, 75% to 25%, an election during what she claimed to members was the middle of contract negotiations.   Vice President Dallas has accused Stewart, as part of his civil lawsuit of spending $500,000 on dinners, which he told me in a personal conversation, occurred during the 2007 CTU election.

While I clearly have a bias against the Stewart regime, I also have a deep knowledge of the CTU Constitutional requirements, the Constitutional authority of the CTU governing bodies (Executive Board and House of Delegates), and the CTU budget and audit processes.   The CTU is now virtually bankrupt.  When I took office in 2001, I inherited $5.2 million in net assets from outgoing the CTU president.  When I left in 2004, there was $5.2 in net assets, as my team stayed within the 3-year budgeted amounts.  That amount of CTU net assets has eroded each year, according to the most recent CTU audit published April 2008.  That audit shows the net asset total to be $188,000.  There is a $2 million deficit and a loan for another $2 million. 

I believe there is compelling evidence that millions of CTU dues dollars have been misappropriated by the Stewart team in the following ways:

1.) As stated, Stewart’s own Vice President Ted Dallas claims in his civil lawsuit against her that Stewart spent “$500,000 in dinners”.  In a personal conversation with me, he admitted that these expenditures were union dues dollars spent for the Stewart-Dallas slate during the 2007 CTU Officer and AFT/IFT Convention Delegate election. This is a blatant violation of federal election law, which pertains because the election was for both local CTU officers and AFT/IFT Convention delegates, and AFT/IFT represent non-public employees.

2.) Stewart has spent (and continues to spend) millions in dues dollars on secret, unauthorized annuity payments to AIG-VALIC on herself and her partisan officers and staff members.   These hidden benefits are not reflected in the CTU budget which must be voted on by CTU delegates.  They account for much of the discrepancy of $4.3 million between Stewart’s authorized budgets and the audits showing actual expenditures during the period 2004-2008.   CTU Delegates (and members) are not aware of these secret benefits nor have they authorized them.

Attached are background materials which I believe support these claims.  I appreciate your review of this information.

                                                        AIG-VALIC Annuities

 

1.   Immediately upon taking office, Stewart’s team had the CTU Executive Board

vote AIG-VALIC an exclusive endorsement.  This endorsement is published in every issue of the monthly CTU newspaper, sent to 35,000 CTU members monthly.

 

2.   Also immediately upon taking office, the Stewart team resumed the secret annuity payments

to officers and staff (worth 22% of each person's salary), which were discontinued by me in 2001.

 

3.   These officer/staff annuity payments amount to $1.5 million each year, in addition to benefits reaped from the “exclusive endorsement” and could be seen as payback for AIG-VALIC’s financial support.

 

4.   Given that officer/professional staff salaries are all over $110,000, these annual AIG-VALIC payments of 22% are about $25,000 in additional compensation per person, (a total of $100,000 each for their 4 years so far), in addition to their published salaries.  Neither delegates nor members are aware of these benefits.

 

5.   Despite repeated requests to view their contracts, a tradition of all past presidents, Stewart refuses to allow anyone, elected delegate or member, to view what they've given themselves and fellow staff members. This is where the AIG-VALIC benefit is defined.

 

6.  In essence, it appears that AIG-VALIC bankrolled their 2004 campaign.  Stewart promotes AIG-VALIC through an exclusive endorsement, they make payments of union dues for themselves to VALIC over $1.5 million a year, and all personally benefit from these very same annuity payments. 

 

7.   I am currently working with a law firm to explore a lawsuit over this secret benefit (and the subsequent squandering of the union's net assets, leaving the CTU virtually bankrupt).  This could be a way to get the proof of AIG-VALIC's involvement and expose this greed and corruption.

  

8.   Here are the amounts paid out to AIG-VALIC for officer and staff annuities, between 2001-2007 (source: CTU audits for those years):  You can see where the practice was stooped for officers and field representatives (2002-2004), and where it was resurrected immediately upon their taking office.  CTU secretaries receive this benefit in lieu of a pension plan for all of these years.  (This benefit is also payback to staff for helping to bankroll their 2004 and 2007 elections.)  Again, CTU members and delegates have no knowledge of this.  Stewart spent about the same amount on the annuities as the "unauthorized, overbudgeted amount", per the audits, and the House never voted to approve them.

 

               2000    $1.04 million

               2001       1.46

               2002        .81

               2003        .70

               2004        .83

               2005       1.11

               2006       1.46

               2007       1.55

 

 

Expenditure of Union Dues in 2007 CTU Election

 

 1.  Dallas claims that Stewart approved "$500,000 in dinners over a 12-month period."  He admits this period was during the 2007 CTU Officers election.  (This was done in violation of federal election law as well as the CTU and AFT Constitutions.)  Regarding their expenditure of $500,000 in dinners. 

Dallas told me personally that this was done during the 2007 election.  These were fancy dinners for thousands of members in restaurants across the city of Chicago to campaign for their re-election. 

 

2.  I have several witnesses who will testify that the Stewart team urged people to vote for them in their dinner speeches and passed out UPC campaign literature, also.  

Dallas

confirmed this and it is part of his lawsuit against Stewart, though his suit doesn't specify the dates in his suit, just the amount.   In a 10/17/08 personal conversation,

Dallas

also said the Stewart team has spent over $400,000 on the CTU’s law firm to remove him from office so far.  This is also being done without authorization of this expenditure by the CTU House.

 

Officer and Staff Benefits

 

1.    On the missing $5.4 million and the $3 million in loans, I have all budgets, the complete audits, field rep contracts, and a 2007 officers' contract.  I can prove that all $5.4 million went directly into their pockets ( e.g. $23,000 annual AIG-VALIC contributions, pensionable $15,000 annual car allowances, unlimited expense accounts, annual holiday bonuses of a week's salary, all for 40 officers and staff members in their political party). 

2.   All officer and staff pensionable expense/auto compensation goes to increase their pensions which are paid out of public funds.  Having one's car allowance be pensionable compensation is illegal.

3.  Dallas also said that all the staff members were required to contribute $3,000 each for their campaigns, despite the fact that staff members are supposed to remain apolitical. 

 

4.   Over $850,000 in unauthorized payments went to the 5 officers alone ($210,000 per 5 officers over 4 years: $25,000 VALIC annuity, $15,000 pensionable car allowance, and $2,500 holiday bonus)--all done without any approval at all--without even the House's knowledge as they continue to refuse to show their contracts. Regarding the claim of $850,000 in unauthorized payments to the 5 officers:

               1.) annuities @ 22% of salary (average officer salary = $120,000)=   $ 25,000

               2.) pensionable car compensation                                                          $15,300   

               3.) 1 week's pay for holiday bonus=                                                         $2,500                                                                                             

                                                                                                             Total     = $ 42,500 each

                     Grand total: 5 officers x 4  years   to date                                     = $848,000

 

Constitutional Breaches

 

1.  Constitutional breach:  By-Laws Article XV Compensation and Expenses,

Section 1.  “By a two-thirds majority, the House of Delegates may sanction provision in the union budget for a specified compensation for one or more of the officers as resources will allow." These compensations (above) have never been brought to the House; House members are unaware they exist; they are not included in the budgets they present, which do include the officers' base salaries.  Stewart repeatedly refuses, verbally and in writing, to share these contracts; her team has lied about the budget votes of the last 3 years, over delegate objections against the budgets and against the announced results, and never reached the required 2/3 majority on officer compensation.

 

2.   There is another provision in the CTU Constitution: "The Union shall not promote or permit itself to be used to promote any advantage for any member or particular group of its members unless the House of Delegates shall decide by a majority vote that such action is in the interest of the

Union as a whole." There is a whole "group of members", i.e. officers and professional staff, which has a huge financial advantage over the other members at their expense, but unknown to them.

 

3.  The CTU Constitution also requires that any mulit-year contract be approved by the House of Delegates.  While the Field Representatives Contract is multi-year, it has never been presented to the House of Delegates, in violation of this provision.

 

CTU Budget Information

 

1.   Here is a comparison of the actual supposedly approved budgeted amount for each year with the actual published audit amounts for each year:

 

04-05    $5.8 mil approved by House for salary/benefits; $7.7 mil actually spent   ( $1.9 mil over)

05-06     6.8 mil approved by House; $7.9 actually spent                                         ($1.1 mil over)

06-07    7.0 mill approved; $8.3 actually spent                                                         ($1.3 mil over)

07-08    7.9 mil approved;  audit not yet complete                 

Total unauthorized expenditures 2004-2008:                                                               $4.3 million                                          

 

2.   CTU budget vote counts (Constitution requires 2/3 vote for officer compensation):

6/05  207 yes/167 no(Substance reported that Stewart reversed yes/no votes)

6/06  259 yes/117 no (as I noted before—voted only to close debate, not budget)

6/07  A voice vote and thought to be close

6/08  175 yes/170 no (thought by most that yes/no vote was reversed)

 

3.   Budgets 2001-2009.  The Stewart team falsely indicated a budget surplus each year when they were borrowing millions and denying they were borrowing. 

4.   In Dallas' lawsuit against Stewart, he claims that a.) she reversed the YES and NO votes on the 2008-09 House budget vote;

5.  Dallas also said their Sergeant at Arms would rig vote counts in the House of Delegates on the budget and on other issues.  He stated their appointed Sergeant of Arms would automatically add in all the other sergeants-at-arms and the 5 officers to every count to pad close votes.

6.  Dallas , in a 10/17/08 personal conversation, said the Stewart team has spent over $400,000 on the CTU’s law firm to remove him from office so far--and counting.  This is also being done without authorization of this expenditure by the CTU House.

 

References:

1. Field Representatives Contract, 2007-2011 (under the table copy)

2. Officers' Contract, 2007 (included in Dallas lawsuit against Stewart)

3. Personal conversation with Ted Dallas, Monday, June 16, 2008 and Friday, October 17, 2008

4. CTU Budgets, 2000-2008

5. CTU Audits, 2000-2007

 

 

Proposed Budgets and CTU Audits from 2000-2008. 

Below are copies of all CTU Proposed Budgets and CTU Audits from 2000-2008.  If you would like copies emailed to you for downloading,printing and easier review, please email your request to:  ProActiveChicagoTeachers@yahoo.com and we will send you the documents.  Regarding the most recent CTU Budget, you will see that the benefits and travel lines under Program Services and Administrative have doubled since 2004:  from $1.5 million in 2004 to 3.3 million in 2008.  These increased costs reflect where the missing $5 million in CTU assets has gone--to the Stewart team, not to services for the CTU membership.