HOW SHOULD UNIONS RUN THEIR INVESTMENT PROGRAMS?
The quick answer is, “Very carefully.” A slightly longer answer is, “The opposite of what Madoff was allowed to do.” The four biggest federal sector unions have reported over $50 million in investments to DOL. NTEU leads the pack with $34 million, AFGE follows at $14 million, NFFE is next at $5 million while IFPTE and NATCA reported around 1.3 million. (NTEU’s edge is largely due to the recent sale of its headquarters building while AFGE has $48 million in fixed real estate assets from the building it owns. NTEU has less than 1% of AFGE’s fixed asset value.) Moreover, these are very actively managed funds. AFGE, for example, reported over $11 million in net investment sales and over $9 million in net purchases last year on its $14 million total. Further complicating the risks of managing this money is that investment advisors and houses are not beyond sprinkling generous “perks” on the financial decision-makers to win their business or push them to a certain investment. Does anyone really think that they will not dangle “perks” to convince a union’s decision-maker to use them or to buy into one fund versus another? One of the unions named above almost removed its national president because a vendor gave him furniture for his apartment. Fortunately, that was decades ago. Given the political climate for federal employees and unions, it would only take one good financial scandal to get them all dragged across the coals of a Congressional committee for a roasting on any embarrassing expenditure as well as their stewardship of negotiated official time and other federal funds. Congressman Issa’s eyes would roll back into his head as he slipped into a state of prolonged quivering ecstasy if he came across a union miscue he could exploit. So, we want to share our thoughts on the matter to get a few conversations going out there before the union convention season arrives this summer. Continue reading