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FOR THE DISTRICT OF COLUMBIA CASE NUMBER: 1:02CV02536 FIRST AMENDED COMPLAINT Nathan
A. Saunders II v. Esther Hankerson, 1221 Massachusetts Avenue, N.W. #1021 Washington D.C. 20005 Gwendolyn M. Hemphill 1307 Lark Lane, Fort Washington, MD 20744 Leroy Holmes Errol Alderman, individually and d.b.a. Expressions Unlimited Michael Martin, individually and d.b.a. Expressions Unlimited Cheryl Martin Gwendolyn B.
Clark 1717 K St., N.W. Washington, D.C. 20036 Jerolyn Spicer Adolphus Brookins,
Jr. H. Beryl Hager Dorothy E.
Duppias Brenda Jenkins Delores Haynes
Dorothy King
Theresa D. McDougald
Delores E. Timmons Janice E. Waters Deloris B. Brown Sarah Crawley
Alan M. Friedman
Benita Nicholson
Elmma C. Oxendine
John Donnelly
Urman Edwards
John Traina
Margarete Jamison
Theodore R. Vincent, Jr. American Federation of Teachers, AFL-CIO
Edward J. McElroy
James Goosby
Independence Federal Savings Bank
Washington Teachers Union INTRODUCTION1. Between 1995 and July 2002, Defendant Barbara Bullock served as elected President of the Washington Teachers' Union ("WTU"), Defendant Gwendolyn Hemphill served as Bullock's Special Assistant, and Defendant James Baxter served as the WTU's elected Treasurer, and in these capacities, all three were legally obligated and duty-bound to serve and protect the interests of the WTU and its approximately 5,000 members. Instead, Bullock, Hemphill, and Baxter, acting in concert with and/or due to the failed oversight of other Defendants, plundered and depleted the WTU treasury by illegally misappropriating more than Five Million Dollars ($5,000,000.00) for substantial personal gain and for the benefit of their families and friends. These officers and union insiders used the WTU treasury, funded almost entirely from union dues paid by active and retired teachers for the District of Columbia Public Schools ("DCPS"), as a personal bank account to pay for, on information and belief, such luxury items as: multiple fur coats and fur accessories; antiques; a million-dollar wardrobe of designer and custom clothing; multiple designer handbags; a $10,000 plasma television and other electronic and stereo equipment; a personal chauffeur; travel to the Bahamas; a $57,000 Tiffany tea set; bone china; home computers; custom hair wigs; season tickets for professional sports events; jewels and pearl necklaces; artwork; a $6,800 ice bucket; partial payment towards a new Cadillac; and home furnishings, including a dining table and a burled wood desk.2. The American Federation of Teachers, AFL-CIO ("AFT"), the WTU's national parent labor organization, ignored the WTU's trail of significant financial missteps and failed in its role as watchdog and parent of the WTU. Despite the mandate imposed by the AFT's constitution that its locals submit biennial audit reports to the AFT, the AFT failed to require WTU to submit an audit any time after 1996. The AFT also failed to insist that the WTU submit timely annual financial reports, which were also required by the AFT's constitution, or failed to detect financial discrepancies in any reports that were submitted. Moreover, although the WTU was behind in paying the AFT its per capita national dues, the AFT and McElroy did not order an investigation or commission an audit of the WTU's suspect finances. Indeed, the AFT failed to conduct any audit or investigation into the WTU's financial affairs until July 2002, after several WTU members lodged complaints with the AFT claiming that unauthorized dues, which totaled more than $700,000, had been deducted from their June 2002 payroll checks. 3. The WTU's Executive Board and Board of Trustees also failed in their roles as fiduciaries and abandoned, for several successive years, their affirmative duties to oversee the WTU's activities. The Executive Board and Board of Trustees failed to exercise critical and required oversight of the WTU's financial affairs or to take the necessary steps to prevent Bullock, Hemphill, and Baxter from converting union checks to millions of dollars in cash, depositing union checks into personal bank accounts, engaging in union-funded spending sprees, sharing union wealth among their families and close associates, making false and fraudulent statements to WTU members, and filing materially false financial reports with the United States Department of Labor and other governmental entities. In addition to their willful ignorance and neglect of duty, Defendant Esther Hankerson, the WTU's General Vice President turned a blind eye after learning, at least as early as 1997, that a WTU insider had forged a union check payable to Bullock for thousands of dollars. 4. The misconduct of these actors allowed Bullock, Hemphill, and Baxter to confer substantial benefits on the following Defendants: a. Leroy Holmes, a personal chauffeur for Bullock who cashed more than One Million Two Hundred Thousand Dollars ($1,200,000.00) in union checks, some made payable to the WTU's vendors, then pocketed some of the cash to pay his unreported union salary and returned the remainder to Bullock, Hemphill, or Baxter; 5. Plaintiff Nathan A. Saunders II, a teacher of History and Government at Anacostia Senior High School, like most of the approximately 5,000 members of the WTU, has been victimized by the illegal and unauthorized acts committed by the Defendants and has been directly and seriously injured through the loss of money and important union services. He brings this derivative action on behalf of the WTU because the AFT has denied that it has any responsibility for failure to oversee the WTU. He is suing for damages on behalf of the WTU, the restitution of the WTU's funds, the appointment of an independent monitor, and other injunctive relief. JURISDICTION AND VENUE6. This action arises under provisions of the Labor-Management Reporting and Disclosure Act (LMRDA), 29 U.S.C. §401 et seq., the Labor-Management Relations Act (LMRA), 29 U.S.C. §141 et seq., the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C: §1961 et seq., and District of Columbia law. This Court has jurisdiction over the case pursuant to 28 U.S.C. §1331 because this complaint arises under the laws of the United States, and 28 U.S.C. §1367 because supplemental claims arising under the laws of the District of Columbia are so related to the Federal claims in this action that they form part of the same case or controversy. 7. Venue is proper in the United States District Court for the District of Columbia pursuant to 28 U.S.C. §1391(b)(2) because a substantial part of the events and omissions giving rise to the claims occurred in the District, the WTU is located in the District, the AFT is located in the District, and Barbara A. Bullock and Gwendolyn H. Hemphill reside here. 8. All of the Defendants are subject to the exercise of personal jurisdiction by this Court.9. There exists now between the parties an actual, justiciable controversy in which Plaintiff is entitled to relief because of the facts and circumstances set forth below. 10. This is a derivative action brought pursuant to Rules 23.1 and 23.2 of the Federal Rules of Civil Procedure. Plaintiff was a member of the WTU at the time of the events complained of herein. This action is not a collusive one to confer jurisdiction on a Court of the United States which it would not otherwise have. PARTIES11. Plaintiff, Nathan A. Saunders II, is an individual who resides at 3224 Wheeler Road., S.E., Washington, D.C. 20032. 12. Defendant the American Federation of Teachers, AFL-CIO, is a non-profit labor union, having its principal place of business at 555 New Jersey Avenue, N.W., Washington, D.C. 20001. 13. Defendant Edward J. McElroy has been the Secretary-Treasurer of the AFT since 1992. McElroy is sued in his capacity as the Secretary-Treasurer of the AFT. 14. Defendant Barbara A. Bullock is an individual who resides at 1221 Massachusetts Avenue, N. W., #1021, Washington, D.C. 20005. Bullock served as the elected President of the Washington Teachers' Union from on or about August 10, 1994 through on or about September 2002. 15. Bullock also was Vice President of the AFT, an elected position on the AFT Executive Council, and was reelected to that position as recently as July 2002. Bullock has since resigned from the AFT's Executive Council. Bullock also served on at least one AFT Task Force. 16. Defendant Gwendolyn M. Hemphill is an individual who resides at 1919 Yorktown Road, N.W., Washington, D.C. 20012. Hemphill is a former WTU employee who served as Special Assistant to the President and Legislative Representative from 1996 through on or about September 2002. 17. Defendant James O. Baxter II is an individual who resides at 1307 Lark Lane, Fort Washington, MD 20744. Baxter was the elected Treasurer of the Washington Teachers' Union. Baxter served as Treasurer from on or about July 1,1994, through approximately September 2002, when he was asked to take a leave of absence without pay from the Union. 18. Defendant Leroy Holmes is an individual who resides at 11101 Bennington Drive, Upper Marlboro, MD 20774. Holmes served as Bullock's personal driver beginning around 1998 through approximately September 2002 and was paid for his services by the WTU. 19. Defendant Errol Alderman is an individual who resides at 2300 Pattern Bond Drive, Silver Spring, MD 20902. On information and belief, Alderman was affiliated with a business called Expressions Unlimited. 20. Defendant Michael Martin is an individual who resides at 1200 Quartette Lane, Bowie, MD 20720. Michael Martin is the son-in-law of Hemphill, the husband of Cheryl Martin, and, upon information and belief, was affiliated with a business called Expressions Unlimited. 21. Defendant Cheryl Martin is an individual who resides at 1200 Quartette Lane, Bowie, MD 20720. Cheryl Martin is the daughter of Hemphill and the wife of Michael Martin. 22. Defendant Gwendolyn B. Clark is an individual who resides at 307 Yoakum Parkway, #711, Alexandria, VA 22304. Clark is Bullock's sister. 23. Defendants Bullock, Hemphill, Baxter, Holmes, Alderman, Michael Martin, Cheryl Martin, and Clark, collectively, are hereinafter referred to as the "Individual Defendants." 24. Defendant Esther Hankerson is the former General Vice President of the Washington Teachers Union. 25. On information and belief, Defendants Janice S. Spencer, Jerolyn Spicer, Adolphus Brookins Jr., H. Beryl Hager, Dorothy E. Dupins, Brenda Jenkins, Delores Haynes, Dorothy King, Theresa McDougald, Delores E. Timmons, Janice E. Waters, Deloris B. Brown, Sarah Crawley, Alan M. Friedman, Benita Nicholson, Elmma C. Oxendine, Maragerete Jamison, and Theodore R. Vincent Jr. (collectively "the WTU Executive Board") were members of the WTU Executive Board for the time period from 1995 to 2002. 26. On information and belief, Defendants John Donnelly, Urman Edwards, and John Traina were members of the WTU's Board of Trustees (collectively "the WTU Board of Trustees") for the time period from 1995 to 2002. 27. On information and belief, Defendant James Goosby resides at 5204 Kaufman CT, Upper Marlborough, MD 20772. On information and belief, Goosby is a tax preparer who prepared financial forms and tax schedules for the WTU between September 2001 and June 2002. On information and belief, Goosby prepared these forms in his individual capacity and/or as a principal or associate of Goosby's Tax Service, an unincorporated Maryland business. 28. Defendant Independence Federal Savings Bank ("IFSB") is a federally chartered stock savings bank located in Washington, D.C. 29. Nominal Defendant the Washington Teachers Union is a labor organization representing approximately 5,000 persons employed by or retired from the Board of Education of the District of Columbia. The membership primarily consists of District of Columbia public school teachers and professionals. FACTSI. The WTU's Unauthorized Deduction of Union Dues.30. Plaintiff, Nathan A. Saunders II, is a teacher for the DCPS and currently teaches at Anacostia Senior High School. Plaintiff is a member in good standing of the WTU and by virtue of his membership in the WTU is a member of the AFT. 31. On information and belief, in April 2002 Bullock wrote a letter to the DCPS requesting it to withhold One Hundred Sixty Dollars ($160.00) as union dues from each paycheck sent to teachers as part of a new contract. This request was not authorized by the WTU Executive Board and did not comply with the WTU's by-laws, which require that special assessments or dues increases to be levied on the membership be approved by a majority vote of Union members at a duly constituted membership meeting. 32. This $160 deduction purported to represent union dues owed on a salary increase that was retroactive to the fall of 2001. In fact, only Sixteen Dollars ($16.00) should have been deducted as the retroactive dues increase for each member. 33. In July 2002, in accordance with Bullock's request, DCPS deducted an unauthorized One Hundred Sixty dollars ($160.00) from Plaintiff's paycheck and also deducted the same amount from each of the paychecks of other WTU members. 34. At first, despite the fact that the deduction took place at Bullock's request, the WTU Executive Board represented to the WTU membership that the deduction was a mistake by DCPS. Plaintiff was told that a telephone call to the WTU office would result in a refund. 35. When Plaintiff requested a refund from the WTU by telephone, he was told that the WTU had a new policy and that he would have to send a letter by fax to the WTU office. Plaintiff complied and sent such a fax in July of 2002. The WTU did not pay Plaintiff $144, which was equivalent to the amount of the dues overcharge, until January 21, 2003. 36. In order to pay $144 to Plaintiff and other similarly situated WTU members, the WTU took out a loan at 5.25% interest over 36 months. The AFT was a cosignatory on this loan, and, on information and belief, the WTU took out the loan at the AFT's behest. On February 3, 2003 the AFT's counsel represented to Plaintiff's counsel that AFT would "grant" the WTU the money needed to pay back the loan and repay any other teachers who had not yet been repaid. 37. Although the AFT has engaged in an audit and published the audit results, the AFT has not fully yet explained what happened to the money that the WTU received from this unauthorized dues deduction. The only statement that the AFT has made through its auditors is that shortly before receiving complaints about the excess dues deduction, WTU had made large payments of delinquent per capita dues to the AFT. II. Saunders's Attempts to Seek Redress.38. Plaintiff has standing to sue on behalf of himself and on behalf of the general WTU membership pursuant to 29 U.S.C. §§ 411 & 501(b) and 18 U.S.C. § 1964(c) for violation of his rights and the obligations that the Defendants owed him and the other approximately 5,000 members of the WTU. Plaintiff was injured through the unauthorized deduction of dues from his paycheck and the WTU is in financial turmoil as a result of the Defendants' actions. The WTU has been injured in the sum of more than Five Million Dollars ($5,000,000.00) by the actions of the Defendants. 39. Plaintiff has exhausted his administrative remedies against both the WTU and the AFT. 40. In November 2002, Plaintiff assisted in drafting a letter directed to the WTU, Interim WTU President Esther Hankerson, Members of the WTU Executive Board, and Members of the WTU Board of Trustees (the "November 2002 letter") requesting that the recipients "provide the WTU Membership written and detailed information regarding the overall financial health of the WTU and the financial oversight practices of our elected Union officers." 41. The November 2002 letter further posed six questions and asked the recipients to "provide written, accurate, and detailed responses to the . . . questions and make the responses available for review, copy, and inspection by the Membership no later than December 9, 2002." 42. The questions included in the November 2002 letter included questions regarding: a. the specific date when WTU members would receive "their retroactive dues refund checks";43. Plaintiff also organized a picket and demonstration, including applying for picket/demonstration permit from the District of Columbia police department, in front of the WTU's offices and the AFT's offices. Plaintiff's remarks on his picket/demonstration permit applications stated that the purpose of the picket and demonstration was "[u]nion members demonstrating against unfair dues, working conditions and misuse of our vital resources. We are demanding a election of New Executive Committee NOW." (Emphasis in original.) 44. A press release announcing the planned picket and demonstration stated that the purpose of the picket and demonstration was to "immediately address the memberships' right to full disclosure of the factors which lead to the stated resignation of our elected president Barbara Bullock," to protest the "unfair and unlawful union dues deduction" and "the most recent institution of yet another dues increase," and to demand that the WTU President, General Vice President, and Treasurer positions "be filled immediately" through a new election. 45. The press release also stated that the purpose of the picket and demonstration was that "[t]he American Federation of Teachers must respond to the entire membership as to how the parent body, which has ultimate oversight responsibility, could allow such alleged improprieties to exist and yet still expect dues paying members to continue to trust their leadership." 46. On November 21, 2002, Plaintiff attended the picket and demonstration of the WTU's offices and the AFT's offices. 47. Plaintiff also voted in favor of a motion for "Dues Refund and No Increase in Union Dues" (the "Motion for Refund of Unauthorized Dues") at a general membership meeting held in November or December 2002. 48. Through his vote for the Motion for Refund of Unauthorized Dues, Plaintiff requested that "the WTU Executive Board . . . refund the one hundred forty-four dollars ($144.00) in unauthorized dues deductions to all affected Bargaining unit members, and to immediately freeze all deduction of union dues at the current twenty-four dollars and seventy-five cents ($24.75) per pay period, until October 1, 2003." 49. Plaintiff and other WTU members in the Motion for Refund of Unauthorized Dues further requested that "the WTU Executive Board also provide each affected member, by December 13, 2002, a written statement indicating when his or her refund will be mailed, and a written explanation of the process implemented by the Executive Board to determine the order in which members will receive their dues refund." 50. The WTU members succeeded in passing the Motion for Refund of Unauthorized Dues. 51. Nonetheless, the WTU Executive Board refused to address the concerns of Plaintiff and other WTU members regarding union financial activities, citing the ongoing FBI investigation. 52. The WTU Executive Board further failed to provide full and adequate responses to the requests stated in the Motion for Refund of Unauthorized Dues by December 13, as requested. On information and belief the answers were posted on or about January 6, 2003. 53. On December 27, 2002, Plaintiff filed a pro se lawsuit against the AFT, the WTU Executive Board, Bullock, Baxter and Hemphill. 54. At the time that Plaintiff filed his pro se complaint, neither the WTU Executive Board nor the AFT had brought suit against the former WTU officers or other Individual Defendants. 55. On January 16, 2003, the AFT ultimately did file its own lawsuit, but continued to deny in this action any and all responsibility for failure to monitor the WTU's finances. For example, in this Court on January 21, 2003, the AFT represented that it had no duties to monitor the WTU's finances. Counsel for the AFT stated that: 56. The AFT also represented that it had no duties to oversee the completion and presentation of the WTU's audit process. Counsel for the AFT stated that: 57. The AFT did not provide any explanation, however, for why the National should be required to receive an audit if it was not required to review it. Moreover, the AFT did not deny that regardless of whether it was required to review the audits, it never received them. 58. Plaintiff wrote to the AFT on January 27, 2003, requesting full union membership meetings. As of the date of this Amended Complaint, and despite the fact that the AFT has had de facto control of the WTU for six months, and de jure control of the union for a week, no firm dates have been set for a full membership meeting, though the AFT has made representations that such meetings will occur. 59. In addition the AFT has failed to take action against those AFT officers and employees responsible for ensuring that the audit process at the WTU and its other locals took place or that the WTU was complying with its financial obligations to its membership and to the AFT. 60. Plaintiff asserts that any further attempts to exercise administrative remedies against the WTU would be futile because the AFT has suspended the WTU's Constitution, and assumed an administratorship of the WTU. The AFT appointed George C. Springer to be the Administrator of the WTU on January 27, 2002. 61. Plaintiff asserts that any further attempts to exercise administrative remedies against the AFT would be futile because the AFT denies it had any responsibility to enforce its audit requirement and because the AFT has failed to agree to his reasonable requests for full membership meetings, though the AFT has represented such meetings will occur. It would be futile to demand that the AFT proceed against itself on behalf of the WTU, particularly in light of its assertion that it had no obligation to act with respect to WTU's audit process. III. The American Federation of Teachers.62. Beginning January 1, 1971, the AFT's constitution required its local unions, such as the WTU, to submit an annual financial statement for the local, including a statement of assets and liabilities and statement of income and expenses, to the AFT Secretary-Treasurer within five months after the local's fiscal year end. 63. As of September 1, 1993, the AFT's constitution began to require its local unions, like the WTU, to submit audits to their members and to the AFT at least every two years. 64. The AFT provides two guidance documents on its website for treasurers of local unions. The first, "Keeping the Records Straight," outlines bookkeeping procedures and financial control programs. The second, the "AFT Guidelines for Audit Committees," outlines the procedures to be used by members of a local union's audit committee for conducting audits. Both of these documents re-emphasize the AFT's constitutional audit requirements. 65. The WTU Executive Board failed to incorporate either the AFT's financial statement requirement or the AFT's audit requirement into the WTU's constitution or by-laws. 66. The AFT, by the vote of its Executive Council, has the power to suspend or revoke the charter of a local union if the existence of such a union is detrimental to the development of democracy in education. 67. The AFT, by the vote of its Executive Council, has special powers to suspend or revoke the charter of a local union for non-payment of national dues. 68. The AFT, by the vote of its Executive Council, has the power to investigate a local union when the local's conduct fails to comply with the provisions of the AFT constitution or when the local's conduct is not in harmony with the principles of the AFT and tends to bring the AFT into disrepute. 69. Bullock was a Vice President of the AFT and a member of the AFT Executive Council from at least July 2000 through July 2002. 70. The AFT did not receive any audits from the WTU after 1996, although the WTU should have conducted at least three audits between 1996 and 2002. 71. On information and belief, the AFT did not receive timely annual financial statements from the WTU. On information and belief, any financial statements that were submitted by the WTU to the AFT between 1996 and 2002 contained financial inaccuracies and discrepancies. 72. On information and belief, the WTU pays the AFT annual membership dues of approximately Seven Hundred Thousand Dollars ($700,000.00). On information and belief, since 1996 the WTU has paid the AFT millions of dollars in membership dues. 73. On information and belief, the WTU became delinquent in its dues to the AFT. 74. The AFT failed to take action to investigate the WTU's finances until September 2002, when they hired forensic auditors. 75. Edward J. McElroy has been the Secretary-Treasurer of the AFT since 1992.76. Under the AFT's constitution, McElroy is responsible for receiving annual financial statements from local unions. 77. On information and belief, McElroy or his office is also responsible for receiving the biennial audit statements from local unions. The stated mission of the AFT financial services department, headed by McElroy, is to assist treasurers and other officers at local unions in dealing with the financial and administrative challenges of running a union. 78. On information and belief, McElroy has not received any of the information required by the AFT's constitution from the WTU since 1996. 79. The WTU's delinquency in its dues payments put or should have put McElroy and the AFT on notice that there were serious financial problems at the WTU. 80. Springer, the Administrator appointed by the AFT on January 27, 2003, to administer the WTU, served on the AFT Executive Council with Bullock. IV. The Washington Teacher's Union.81. The WTU is a labor organization representing approximately 5,000 people employed by or retired from the Board of Education of the District of Columbia. The membership primarily consists of District of Columbia public school teachers and professionals. 82. The WTU is affiliated with the AFT. Individuals who are members of the WTU are also members of the AFT. 83. The WTU was governed by a constitution and by-laws which set forth the WTU's purpose, operating procedures, election and discipline procedures, meeting requirements, and the duties of its officers and Executive Board. A. The WTU Executive Board.84. The WTU Executive Board was the governing body of the WTU with general oversight responsibilities. 85. As part of these responsibilities, the WTU Executive Board was required to maintain adequate oversight over the activities of the individuals handling the WTU's funds and to demand regular accountings of how those funds were being spent. 86. The WTU constitution and by-laws also granted the Executive Board the specific duty to hire (and fire) union employees, including the Treasurer and accountants. 87. Despite these responsibilities, the WTU Executive Board did not adequately question Bullock or Baxter's decisions or demand a full regular accounting of the WTU's funds. 88. On information and belief, the WTU Executive Board also failed to employ an accountant between 1996 and 2002. B. The WTU Board of Trustees.89. The WTU Board of Trustees had oversight responsibilities for the union finances. 90. The WTU Board of Trustees was required to monitor the WTU's funds and financial records and had the authority to demand regular accountings of how those funds were being spent. 91. Specifically, and according to the WTU constitution and by-laws, each member of the Board of Trustees of the WTU is an elected officer of the WTU charged with "attest[ing] to the accuracy of all bank accounts of Local #6 at the end of each fiscal year" and has the right "to examine all financial records, receipts, expenditures, disbursements, vouchers, bills and statements." 92. The Board of Trustees, together with the Treasurer, is also responsible for preparing the proposed annual budget. 93. According to the WTU constitution and by-laws, the WTU trustees also are to consult with the Treasurer in the preparation of a quarterly report and present their findings to the Executive Board prior to presenting the report to the WTU membership. 94. The WTU's Board of Trustees failed to ensure the accuracy of the WTU's bank accounts on an annual basis. 95. The WTU's Board of Trustees failed to exercise their right to examine the WTU's financial records, receipts, expenditures, disbursements, vouchers, bills and statements. 96. On information and belief, the Board of Trustees also failed to oversee compliance with the WTU's annual budgets. 97. On information and belief, the WTU's quarterly reports also were not issued on a regular basis. 98. None of the members of the Board of Trustees adequately questioned or oversaw the activities of Baxter, Bullock or Hemphill. V. The Individual Defendants Formed an Association-In-Fact Enterprise to Embezzle and Convert WTU's Funds to Their Own Use99. The Individual Defendants and other parties as yet unknown, formed an association-in-fact enterprise, the activities of which affected interstate commerce. The purpose of this association-in-fact enterprise was to defraud the WTU, to embezzle and convert the WTU's funds, and to launder those funds to disguise their origin for the personal gain of the Individual Defendants and others. Through the operation of this enterprise, they engaged in a conspiracy to commit and did commit serious felony offenses to the detriment of members of the Union, including: money laundering, in violation of 18 U.S.C. §1956; engaging in monetary transactions with property derived from unlawful activity, in violation of 18 U.S.C. §1957; and embezzling from the Union, in violation of 29 U.S.C. §501(c). 100. On information and belief, Bullock, Baxter and Hemphill formed the organizational head of this association-in-fact enterprise. Holmes, Michael Martin, Cheryl Martin, Alderman, and Clark helped to carry out the enterprise's activities. 101. Defendants Bullock, Baxter and Hemphill, as officers, agents, and representatives of the Union, had a duty to act in good faith on its behalf in all matters associated with the conduct of Union affairs. 102. Bullock, Baxter and Hemphill abused their positions by knowingly stealing, misappropriating, and converting funds and property purchased with Union funds from the Union for their own use, the use of each other, the use of the other Defendants and others, and otherwise fraudulently misapplied Union funds and property by diverting it to unauthorized persons, such as Holmes, Michael Martin, Cheryl Martin, Alderman, Expressions Unlimited, and Clark, and for other unauthorized purposes and uses. 103. On October 23, 2002, on behalf of the Union, formal requests were made to Bullock, Baxter, and Hemphill to repay to the WTU all of the Union funds expended by or caused to be expended by them for personal and otherwise unauthorized and/or non-Union purposes. 104. Subsequently, on December 23, 2002, a second demand for repayment was made to Bullock, Baxter, and Hemphill. 105. Bullock, Baxter, and Hemphill have not complied with these demands for return of the WTU's property. A. Barbara Bullock.106. Bullock was elected by WTU's membership to the position of President on July 1, 1994. She was reelected to that position in subsequent WTU elections and continued in that role until September 2002, when she voluntarily agreed to relinquish her duties and accept leave without pay from the Union. 107. Bullock formally resigned as President on October 23, 2002. 108. Under the constitution and by-laws of the Union, as President, Bullock was charged with administering all of the affairs of and the executive policy of the Union, acting as Chairman of the Executive Board, and signing all necessary documents, including the cosigning of checks. 109. Bullock had overall responsibility and authority for the conduct of the WTU's affairs. As a union officer handling union funds, Bullock was required to be bonded. On information and belief, no bond was maintained. 110. On information and belief, Bullock acted in concert with Baxter and supervised Clark, Holmes, and Hemphill with regard to their roles in the association-in-fact enterprise. 111. Beginning in 1995, on behalf of the WTU, Bullock and Baxter entered into Corporate Account Agreements with American Express Travel Related Services Company ("American Express") for the issuance of corporate credit cards to the WTU. As stated in the Corporate Account Agreements, American Express issued credit cards to persons whom the Union designated in writing to receive a corporate card ("Corporate Cardmembers"). Baxter and Bullock caused cards from the Corporate Account to be issued to themselves, Esther Hankerson, and Hemphill. Prior to receiving a corporate card, each Corporate Cardmember agreed to the Corporate Cardmember Agreement, which among other things, stated that the American Express Corporate cards were to be used solely for WTU business purposes. 112. The WTU paid the bills for the American Express accounts with Union funds.113. From the period beginning in 1995 through July 2002, Bullock was issued a total of five Corporate Cards from the WTU's two Corporate Accounts, including card numbers 378296498801016 (1995-10/96); 3782-964988-01008 (9/97-7/02); 3782-964988-02014 (11/967/02); 3782993128-11005 (10/00-7/02), and 3782-993128-11013 (9/99-7102). 114. During her tenure as President, Bullock made substantial unauthorized purchases on the WTU's corporate credit cards. A large portion of those charges were for goods and services of a clearly personal nature, including, but not limited to: custom, designer, and handmade clothing; dry-cleaning; beauty salon services; jewelry; art; furniture; and furs. Many such purchases were delivered to Bullock's home or the home of her sister, Clark. 115. Bullock did not receive authorization from the WTU's Executive Board or the Union membership to make those purchases, nor did she reimburse the WTU for those charges. 116. In addition to purchasing items for her personal use, Bullock purchased items on the WTU's Corporate American Express Cards for others. 117. Bullock's unauthorized and personal charges to the WTU's Corporate American Express Cards that have been identified to date exceed One Million Eight Hundred Thousand dollars ($1,800,000.00). 118. Bullock also issued or caused to be issued checks from the WTU's bank accounts to herself and to merchants for the purchases of goods and services solely for her personal benefit, including checks for custom-made clothing and checks to Diners Club to pay for meals, hotels, designer clothing, and jewelry. These checks were not authorized by the WTU's Executive Board and were used to illegally convert funds from the WTU. 119. In total, checks issued or caused to be issued by Bullock to herself and to others for her personal benefit, exceed Three Hundred and Eighty-One Thousand dollars ($381,000.00). 120. Additionally, Bullock issued or caused to be issued unauthorized checks in excess of One Million Five Hundred Thirteen Thousand dollars ($1,513,000.00) from the WTU's bank accounts to Baxter, Hemphill, Holmes, Michael Martin, Cheryl Martin, Alderman, Expressions Unlimited, and Clark, in a scheme to convert the WTU's funds. Those checks were not authorized by the WTU's Executive Board and were used to illegally convert funds from the WTU. 121. On information and belief, in an attempt to conceal the fact that the association-in-fact enterprise had depleted the WTU's funds beyond the WTU's ability to pay its AFT dues, Bullock caused the unauthorized deduction of $160 from the paychecks of WTU members in June 2002. B. Gwendolyn Hemphill.122. On information and belief, Hemphill served as Special Assistant to the President and Legislative Representative of the WTU from 1996 through on or about September 2002, when she voluntarily agreed to relinquish her duties and accept leave without pay from the WTU. 123. Hemphill formally resigned from her positions on November 1, 2002.124. As Special Assistant to the President, Hemphill served as the office manager and high-level aid to Bullock. In this capacity, Hemphill was responsible for overseeing the administration of the WTU's offices and managing its staff. 125. On information and belief, Hemphill supervised Holmes in his activities on behalf of the association-in-fact enterprise. On information and belief, she was responsible for distributing the WTU's funds and consumer goods paid for with the WTU's funds to Cheryl and . Michael Martin. 126. As a result of the illness and subsequent death of WTU's internal accountant, beginning in 1996, Hemphill took over responsibility for many of WTU's financial matters, including check writing, payroll, benefits administration, and accounts receivable. As a union agent handling union funds, Hemphill was required to be bonded. On information and belief, no bond was maintained. 127. In addition to her check writing responsibilities, Hemphill maintained possession of a signature stamp bearing Bullock's signature, which she used to affix Bullock's name to checks written on behalf of the Union. 128. From the period beginning on or about May 1998 through July 2002, Hemphill was issued Corporate Cards from WTU's two Corporate Accounts, including card numbers 3782964988-01040 (5/98-11/99), and 3782-964988-11021 (9/99-7/02). 129. During her tenure as Special Assistant and Legislative Representative, Hemphill used these credit cards, which were issued solely for the purpose of conducting the official business of the WTU, to make numerous unauthorized personal charges, including a large number of purchases of a clearly personal nature, including, but not limited to: art; antiques; electronic equipment; jewelry; evening gowns; designer handbags and clothing; hair care; and personal travel. 130. Hemphill did not receive authorization from the WTU's Executive Board or the Union membership to make those purchases, nor did she reimburse the WTU for those charges. 131. In addition to purchasing items for her personal use, on information and belief, Hemphill purchased items on the WTU's Corporate American Express Cards for use by other members of her family, including her husband, Laurence Hemphill, and other Defendants, including Michael Martin, Cheryl Martin, and Clark. 132. In total, Hemphill's unauthorized and personal charges to the WTU's Corporate American Express accounts exceeds Three Hundred and Eleven Thousand dollars ($311,000.00). Hemphill did not receive authorization from the WTU's Executive Board or the Union membership to make the unauthorized purchases, nor did she reimburse the WTU for those charges. 133. Hemphill also wrote or caused to be written checks to herself in the amount of One Hundred and Eighty-One Thousand dollars ($181,000.00). Those checks were not authorized by the WTU's Executive Board and were used to illegally convert funds from the WTU. Additionally, Hemphill wrote or caused to be written checks to other participants in the illegal scheme, including Holmes, Michael Martin, Cheryl Martin, Alderman, Expressions Unlimited, and Clark. Included among those checks were some checks written to Expressions Unlimited, the proceeds of which were deposited in Hemphill's personal bank account. 134. On information and belief, Hemphill directed Holmes to cash checks for large sums of money on the WTU's account and to return the proceeds to her or deposit them in Bullock's personal bank account. On information and belief, upon receiving cash proceeds from Holmes, Hemphill returned a portion of the money to Holmes and retained the rest. 135. Checks issued on the WTU's accounts were prepared by Hemphill, signed by Baxter, and, on information and belief, issued with the knowledge of, and in many cases, at the direction of Bullock. C. James Baxter.136. Baxter was elected to the position of Treasurer by the WTU membership and assumed office on or about July 1, 1994. He was subsequently reelected as Treasurer in biennial elections and continued in that role until September 2002 when he "stepped aside" after the WTU Board removed Baxter from his duties and put him on leave without pay. Although the WTU formally requested Baxter's resignation on October 23, 2002, he has refused to resign. 137. On information and belief, Baxter acted in concert with Bullock and Hemphill to embezzle funds from the Union. On information and belief, Baxter also acted to dissuade the WTU's Executive Board from investigating the WTU's finances. 138. As Treasurer, Baxter was responsible for receiving and disbursing funds, cosigning all checks, issuing all receipts, notifying members of non-payment of dues, presenting financial reports to the membership and maintaining satisfactory financial records. As a union officer handling union funds, Baxter was required to be bonded. On information and belief, no bond was maintained. 139. From the period beginning in 1995 through July 2002, Baxter was issued Corporate Cards from the WTU's two Corporate Accounts, including card numbers 3782964988-01008 (1995-8/97), and 3782-964988-01032 (1995-7/02). 140. During his tenure as Treasurer, Baxter used the credit cards, which were issued for the sole purpose of conducting the official business of the WTU, to make a large number of purchases of a clearly personal nature, including, but not limited to: purchases at bars and nightclubs; art; clothing; theater and sporting tickets; flowers; jewelry; and tobacco. 141. In total, Baxter's unauthorized and personal charges to the WTU's
Corporate American Express Cards exceed Two Hundred Sixty-Seven Thousand
dollars ($267,000.00). Baxter did not receive authorization from the
WTU's Executive Board to make those purchases, nor did he reimburse the
WTU for those charges. 143. Baxter also wrote or caused to be written checks to other participants in the illegal scheme, including Bullock, Hemphill, Holmes, Michael Martin, Cheryl Martin, Alderman, Expressions Unlimited, and Clark. Those checks were not authorized by the WTU's Executive Board or membership and were used to illegally convert funds from the WTU's treasury. D. Leroy Holmes144. Between approximately October 1998 and September 2002, Holmes received in excess of 200 checks, ranging in amounts from $500 to $20,000, and totaling more than One Million Two Hundred Thousand dollars ($1,200,000.00). Those checks were written on the WTU's primary checking account and were cashed by Holmes at the WTU's bank, IFSB. 145. At least four of the checks cashed by Holmes at IFSB were equal to or exceeded Ten Thousand Dollars ($10,000.00). 146. On information and belief, after cashing those checks Holmes either provided the cash proceeds to Hemphill who returned a portion of the cash to Holmes and kept the rest of the money for unauthorized purposes, or deposited funds into Bullock's personal bank account. 147. In addition, Holmes cashed numerous altered checks, including checks in which the original payee was marked through and his name written in. The altered checks cashed by Holmes were originally payable to Verizon, D.C. Treasurer, Slevin & Hart, and Blue Cross/Blue Shield among others, for the payment of the WTU's legitimate business expenses. 148. Holmes cashed, deposited, or otherwise made use of checks he received knowing that the funds were proceeds of unlawful activity. 149. Holmes knew that the checks he cashed on the WTU's bank accounts resulted in the unlawful embezzlement and conversion of the WTU's funds. 150. While Holmes provided services to the WTU, namely driving Bullock to appointments and performing odd jobs at the WTU's office, the money he received as a result of his participation in the illegal scheme, greatly exceeded the value of his services to the WTU. 151. Payments made to Holmes in excess of the reasonable value of his services were made without the authorization of the WTU's Executive Board, and the WTU's membership did not know of these payments. E. Michael Martin.152. Michael Martin is the son-in-law of Gwendolyn Hemphill, the husband of Cheryl Martin, and, on information and belief, was affiliated with a business called Expressions Unlimited. 153. Michael Martin received unauthorized funds and material goods paid for with the WTU's funds, personally and as an agent of Expressions Unlimited, and conducted financial transactions with money received as the result of unlawful activity and money laundering. 154. Michael Martin cashed, deposited, or otherwise made use of unauthorized checks totaling over Twenty-Five Thousand dollars ($25,000.00) which were written to him on WTU's bank accounts. 155. Additionally, Michael Martin cashed, deposited, or otherwise made use of unauthorized checks and funds totaling over Four Hundred and Fifty Thousand dollars ($450,000.00) which were written to Expressions Unlimited on WTU's bank accounts. 156. Michael Martin cashed, deposited, or otherwise made use of checks he received personally and on behalf of Expressions Unlimited knowing that the funds were proceeds of unlawful activity. 157. Michael Martin participated in these financial transactions knowing that he was wrongfully embezzling and converting money from the WTU. 158. Payments made to Michael Martin were made without the authorization of the WTU's Executive Board, and the WTU's membership did not know of payments made to Michael Martin. F. Cheryl Martin.159. Cheryl Martin is the daughter of Gwendolyn Hemphill and the wife of Michael Martin. 160. Cheryl Martin received unauthorized funds and material goods paid for with the WTU's funds and conducted financial transactions with money received as the result of unlawful activity and money laundering. 161. Cheryl Martin cashed and deposited unauthorized checks written on the WTU's bank accounts to Errol Alderman, her husband Michael Martin, and Expressions Unlimited. 162. Cheryl Martin cashed, deposited, or otherwise made use of the checks she received on behalf of Expressions Unlimited, Michael Martin, and Errol Alderman knowing that the funds were proceeds of unlawful activity. 163. On information and belief, Cheryl Martin deposited unauthorized WTU checks made payable to Expressions Unlimited into the Annapolis Bank & Trust bank account she shared with her husband, Michael Martin; the Expressions Unlimited bank account at Bank of America; and the personal bank account of Hemphill. 164. Cheryl Martin participated in these financial transactions knowing that she was wrongfully embezzling and converting money from WTU. 165. Payments made to and Union money spent on behalf of Cheryl Martin were made without the authorization of the WTU's Executive Board, and the WTU's membership did not know of payments made to Cheryl Martin. G. Errol Alderman.166. On information and belief, Alderman was affiliated with a business called Expressions Unlimited. 167. Alderman received unauthorized funds from the WTU, personally and as an agent of Expressions Unlimited, and conducted financial transactions with money received as the result of unlawful activity and money laundering. 168. Additionally, Alderman cashed, deposited, or otherwise made use of unauthorized checks totaling over Twenty-One Thousand dollars ($21,000.00) which were written to him on the WTU's bank accounts. 169. Alderman cashed, deposited or otherwise made use of unauthorized checks totaling over Four Hundred and Fifty Thousand dollars ($450,000.00) which were written to Expressions Unlimited on the WTU's bank accounts. 170. On information and belief, Cheryl Martin deposited some of the unauthorized checks received in the name of Expressions Unlimited and endorsed by Alderman into the personal bank account of Hemphill. 171. Alderman cashed, deposited, or otherwise made use of checks he received personally or on behalf of Expressions Unlimited knowing that the funds were proceeds of unlawful activity. 172. Alderman participated in those financial transactions knowing that he was wrongfully embezzling and converting money from the WTU. 173. Payments made to Alderman were made without the authorization of the WTU's Executive Board, and the WTU's membership did not know of payments made to Alderman. H. Gwendolyn Clark.174. Clark is the sister of Barbara Bullock.175. Clark received unauthorized funds and material goods paid for with the WTU's funds and conducted financial transactions with money received as the result of unlawful activity and money laundering. 176. Clark and Bullock share a joint bank account, where some of the proceeds of unauthorized checks written on the WTU's bank accounts were deposited. 177. Clark and Bullock also share a Diners Club charge card (account number 3850814404-0035), on which numerous personal items were purchased by Bullock, Clark, and Clark's daughter and paid for by the WTU. 178. Between the period of January 1996 through July 2002, payments were made by WTU to Diners Club for account number 3850-814404-0035 in excess of One Hundred and Nineteen Thousand dollars ($119,000.00). 179. Clark made use of unauthorized funds and material goods paid for by the WTU's funds she received from Bullock, Hemphill, and the WTU knowing that the goods and funds were proceeds of unlawful activity. 180. Clark accepted funds and material goods paid for by the WTU's funds, knowing that she was wrongfully embezzling and converting money from the WTU. 181. Payments made to and WTU money spent on behalf of Clark were made without the authorization of the WTU's Executive Board, and the WTU membership did not know of the payments made to and WTU money spent on behalf of Clark. I. All Individual Defendants.182. At all times, Bullock, Baxter, Hemphill, Holmes, Michael Martin, Cheryl Martin, Alderman, and Clark knew that the funds and material goods paid for with the WTU's funds that were the subjects of their transactions represented the proceeds of unlawful activity and cashed and deposited those checks with the intent of carrying out the unlawful activity, and/or to conceal or disguise the nature, the location, the source, the ownership or the control of the proceeds. 183. Defendants' activities are the subject of a criminal investigation by the federal government. VI. Esther Hankerson.184. Esther Hankerson served as General Vice President during Barbara Bullock's entire term as President. Esther Hankerson knew or had reason to know that Bullock was misappropriating the WTU's funds. 185. Hankerson has admitted that at some point in 1997 she received a phone call from Independence Federal Savings Bank, the WTU's bank, stating that it had been presented with an $8,000 WTU check that was made payable to Bullock and that ostensibly had been signed by Hankerson. 186. Hankerson indicated that she had not signed the check and that the signature was a forgery but nevertheless instructed the bank to pay it. 187. Hankerson claims that she confronted Bullock about the check and that Bullock promised to repay the money. However, on information and belief, there is no evidence that the money was repaid. 188. On information and belief, Hankerson did not report the forgery or the payment to Bullock to anyone else at the WTU, the WTU Executive Board, the WTU membership, or the AFT. 189. On information and belief, Bullock subsequently issued many other checks with forged Hankerson signatures. VII. James Goosby.190. James Goosby is the owner and operator of Goosby Income Tax Service, an unincorporated business. On information and belief, Goosby is not a Certified Public Accountant. 191. On information and belief, in August 2001, Goosby entered into a contract with Hemphill on behalf of the WTU which required the WTU to pay Goosby $5,000 per month in exchange for the preparation of WTU financial statements, Forms 990, and Forms LM-2. 192. On information and belief, Goosby prepared financial forms for the WTU between September 2001 and June 2002. However, these financial forms showed serious discrepancies with the actual facts. 193. As an example of the discrepancies between Goosby's forms and actual WTU expenditures, on WTU's 2001 LM-2 form Goosby reported only payroll disbursements to Bullock and Hemphill; understated the amounts disbursed to Baxter; and showed no disbursements of any kind to Holmes. 194. On information and belief, as Holmes's personal tax preparer, Goosby had reason to know that by April 2002, Holmes derived his income primarily from the WTU and was being paid approximately $105,000 per year. On information and belief, Goosby's schedules show that the WTU issued checks to Holmes in the amount of $1,046,873 between October 1998 and December 2001. VIII. Independence Federal Savings Bank195. IFSB is a federally-chartered stock savings bank located in Washington, D.C.196. The WTU maintained a checking account at IFSB. 197. From October 9, 1998, to August 29, 2002, Leroy Holmes cashed or negotiated approximately 228 checks drawn on the WTU's account with IFSB totaling approximately One Million Two Hundred Thousand Dollars ($1,200,000.00). 198. Holmes's activity was suspicious in several respects:
199. As a result of his frequent check cashing, Holmes developed a close working relationship with Gretchen Calloway, a branch manager for IFSB. 200. At Calloway's request, Holmes would call Calloway before cashing large checks to verify that the bank had enough cash on hand. 201. In addition to cashing checks written to Holmes, IFSB paid numerous, checks that contained the forged signature of Esther Hankerson. 202. In 1997, someone from IFSB called Hankerson to inform her that another bank had presented a check for payment that appeared to contain Hankerson's forged signature. Hankerson informed the bank that she had not signed the check, but instructed the bank to pay it, and the bank did so. 203. At that time, Hankerson instructed IFSB not to authorize payment of any additional checks where her signature was in question and to call her immediately if any other forged checks were presented for payment. 204. Despite this instruction, IFSB paid numerous checks on which Hankerson's signature had been forged, including checks written to Bullock, Gwen's of Columbia, Diners Club, Domestic Bliss, and Ascension Gallery. 205. IFSB also paid checks that were originally made payable to WTU vendors but were subsequently altered to be made payable to Cheryl Martin. 206. Despite being authorized to do so by a resolution from the WTU Executive Board, IFSB refused to provide complete information to investigators conducting an audit on behalf of the AFT. COUNT I
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