OFFICE OF THE INDEPENDENT HEARING OFFICER
IN THE MATTER OF |
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DOCKET NO. |
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LEONARD NOBLE (LOCAL 225) |
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98-26D |
ORDER AND
MEMORANDUM
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PROCEDURAL HISTORY
This matter comes before the Laborers’ International Union of North America (“LIUNA”) Independent Hearing Officer (“IHO”) pursuant to the LIUNA Constitution and Ethics and Disciplinary Procedure (“EDP”).
On May 13, 1998, the LIUNA General Executive Board Attorney (“GEB Attorney”) filed five Disciplinary Charges against Leonard Noble (“Noble”) alleging violations of federal law and the Ethical Practices Code (“EPC”). Specifically, Noble is charged with attempting to bribe an Executive Board member so that she would resign, improper use of union credit cards, unauthorized meal charges, and breach of fiduciary duty by subjecting Local 225 to expenses for non-union members without obtaining prior authorization from the membership.
The IHO held a hearing in Chicago, Illinois on September 10, 1998. Despite due notice, Noble did not appear at the hearing. Noble did not communicate with the GEB Attorney or the IHO at any time to indicate he wished to extend or delay the proceedings.
Following the hearing, the GEB Attorney filed a Motion to Withdraw Charge V. The Motion was granted.
FINDINGS OF FACT
1. 1. Noble is a member of LIUNA Local Union 225 (“Local 225”), located in Des Plaines, Illinois.
2. 2. In May 1996, Noble became the Assistant Business Manager of Local 225 and held that position until March 17, 1998 when Local 225 was placed under trusteeship. See In the Matter of Local Union 225 Trusteeship, IHO Order and Memorandum, 97-54T (March 17, 1998). Upon entry of the trusteeship order, Noble was removed from his position as Assistant Business Manager.
3. 3. The hearing regarding the Local 225 Trusteeship was held in Chicago, Illinois on December 15-18, 1997 (“Trusteeship Hearing”). The hearing was extensive. Numerous witnesses testified. Local 225 was represented by counsel. The transcripts of the trusteeship hearing are made part of the record in this matter. The transcripts contained the direct and cross examination of the following witnesses: John R. Billi, Jenell M. Totani, Mary Williams, Daniel M. Dumo, Ronald A. Broom, Alex Overton, Linda Kosiarek, John Dineen, John J. O’Rourke, Howard Bert Levinson, Al Peterson, Joseph A. Lombardo, Jr., Carmen Charles, and James Sykes.
4. 4. At the hearing in the present matter, the GEB Attorney made the following witnesses available for cross examination: John Burns, John Dineen, Dan Dumo, Robert Scigalski, and Mary Williams. Burns, Dineen, and Scigalski testified. Dumo submitted a written declaration after the hearing.
5.
CHARGE I
6.
7. On or about November 5, 1995, Leonard Noble, while a member and representative of Local 225, did attempt to bribe Local 225 Executive Board member Mary Williams with $1,000 to resign her position from the Board, in violation of the Democratic Practices Section of the Ethical Practices Code.
8.
9. 5. Mary Williams (“Williams”) is a former Executive Board member. Williams testified before the IHO during the Trusteeship Hearing on December 16, 1997. Williams was also available for cross examination at the September 10, 1998 hearing in the present matter. I credit Williams’s testimony.
10. 6. Williams was appointed an auditor of Local 225 in 1994. In 1995, she was appointed to fill a vacancy on the Executive Board. Trusteeship Hearing Transcript of December 15-18, 1997 (“TH Tr.”) 281, 333.
11. 7. On November 5, 1995, Noble, an Executive Board member, came to Williams’s house at about 5:30 p.m. with another man, whose identity she did not know, and offered her $1,000 to resign from the Executive Board. Williams said Noble told her that John Galioto[1] (“Galioto”) wanted to become Business Manager of Local 225 and wanted her to resign. At that time, Galioto was Vice President of Local 225. Noble told Williams that Galioto’s father was a member of organized crime and they “play dirty.” Williams refused the money and refused to step down from the Executive Board. TH Tr. 282-87
12. 8. The GEB Attorney deposed Noble about the above incident on November 13, 1997. At the deposition, Noble testified that he and a man named “Jimmy” went to Williams’s home “…because an invitation had been extended to come to a church activity and I think the local bought tickets. It was a Sunday. She had invited everybody to come to the affair and also to come to her house. We didn’t go to the affair.” See GEB Attorney Exhibit (“ GEB Ex.”) 17 at 19.
13. 9. Williams stated that the only persons at her home that evening were Williams, her daughter, and her three grandchildren. There was no party or social function at her house. TH Tr. 388.
14. 10. Williams related this incident to the officers at the next Executive Board meeting of Local 225 on November 17, 1995. She had an audio tape recorder in her pocket and she taped the Executive Board meeting. See GEB Ex. 3. The recording revealed that when Williams related the visit as described in paragraph 7, above, Galioto became angry and engaged in a shouting match with her.
15. 11. No action was taken by the Executive Board following Williams’s report.
16. 12. In its post hearing brief of the Trusteeship Matter, Local 225 argued that this incident is not probative because Williams did not bring this incident to the attention of law enforcement authorities and because she waited one year before reporting the incident to the LIUNA Inspector General (“IG”). The delay in reporting the matter to the IG does not affect the truthfulness of Williams’s statements. Williams brought the incident to the attention of the Executive Board twelve days after it occurred. Failure to bring the incident to the attention of law enforcement authorities has no effect on its probative value here. Moreover, this appears to be a purely internal union matter and not a likely subject for law enforcement action.
17. 13. A fair inference from the evidence is that Galioto wanted to become Business Manager and Galioto wanted Williams off of the Executive Board so she could be replaced with a member who would vote for him, in the event that the Business Manager resigned.[2]
18. 14. Williams later resigned her position on the Executive Board for reasons which are not relevant here.
19. 15. I find that Noble, in conjunction with Galioto, attempted to pay Williams to resign from the Executive Board.
20.
CHARGE II
21. From in or about November 1996 through in or about September 1997, Leonard Noble, while a member and representative of Local 225, did knowingly convert assets of the union to his own use through improper and fraudulent use of the union’s credit card, in violation of 29 U.S.C. Section 501(c) and the Financial Practices Section of the Ethical Practices Code.
22.
23. 16. Local 225 has a written policy prohibiting officers from using the union credit card for personal expenditures. Noble signed an acknowledgment of the Union policy that union credit cards were to be used solely for official union business and that personal expenditures were not permitted. TH Tr. 57. See also GEB Ex. 12.
24. 17. The acknowledgement, signed by Noble, states in pertinent part:
25. The sole purpose for this credit policy is for the convince [sic] of the employee in not using cash, record keeping and accounting for official Union business of expenses.
26.
27. Any other use of this policy is prohibited and not authorized.
28.
29. Each charge shall be reviewed and a written detailed explanation shall be submitted on a signed UNION EXPENSE VOUCHER.
30.
31. If any charges are of any personal nature and not for official union business, payment is immediately demanded and required. If the unauthorized amounts are not immediately paid the total amount shall be deducted from the employees next pay check and all credit privileges shall be lost.
32.
33. GEB Ex. 12.
34. 18. IG Inspector John R. Billi (“Billi”) testified at the Trusteeship Hearing on December 15, 1997. Billi’s findings were based on the audit he conducted of Local 225 records, the results of which are set out below.
35. 19. Noble used his Local 225 American Express card during his vacation in Paris, France in November 1996. While in Paris, Noble charged approximately $767.43 dollars to his union credit card which was reflected on the December 14, 1996 billing statement. TH Tr. 17. See also GEB Ex. 13. Noble admitted using the union card in Paris and that the multiple charges included three sight seeing tours and a topless dancing club, none of which had a union purpose. GEB Ex. 15. See also GEB Ex. 13.
36. 20. Daniel M. Dumo (“Dumo”) is one of several deputy trustees for Local 225. Prior to March 17, 1998, Dumo was the Secretary-Treasurer of Local 225. Dumo is also a former Business Manager and Assistant Business Manager of Local 225.
37. 21. Dumo testified that as the Secretary-Treasurer, upon receipt of a charge that appeared to be a personal expenditure, he immediately questioned the charging officer. If the expense was personal, Dumo required the officer to reimburse the Local. TH Tr. 411.
38. 22. Dumo testified that he initiated a conversation with Noble regarding the Paris charges, and only after he approached Noble did he offer to reimburse Local 225. TH Tr. 418. In his deposition, Noble claimed that he approached Dumo first about repaying the local. GEB Ex. 15 at 67. I credit Dumo’s testimony.
39. 23. Noble reimbursed Local 225 by money order on January 9, 1997. TH Tr. 22. See also GEB Ex. 13.
40. 24. Billi testified that all documentation for Noble’s 1996 expenditures was missing. TH Tr. 103. During his investigation of Local 225, Billi found no supporting documentation for the purchases made in Paris. TH Tr. 16.
41. 25. Noble violated the union policy which he acknowledged by signature on February 21, 1997. Noble violated the policy by using the union credit card, even though he later may have reimbursed Local 225. The expenditures were not such that one might mistakenly believe were for union purpose, but were ones which were clearly personal in nature.
42.
CHARGE III
43. From in or about January 1997 through in or about September 1997, Leonard Noble, while a member and representative of Local 225, did knowingly convert assets of the union to his own use through abuse of the union’s meal policy, specifically by charging to the union meal expenses which were not reasonably related to union business or not properly chargeable to the union, in violation of 29 U.S.C. Section 501 (c) and the Financial Practices Section of the Ethical Practices Code.
44.
45. 26. Billi found that approximately $34,000 was spent on meals by Local 225 officers during the first nine months of 1997. TH Tr. 14. Dumo corroborated Billi’s testimony. TH Tr. 437. Dumo confronted all the officers about the excessive meal charges and told them to ensure the expenses were not for personal reasons. This was to no avail. TH Tr. 443.
46. 27. Noble attended 289 meals during the first nine months of 1997, the vast majority of which were attended only by Local 225 officers, stewards, employees, contractors, and/or Noble’s girlfriends and friends. See GEB Ex. 9.
47. 28. Noble signed for a total of $9,050.64 in restaurant expenditures for the first nine months of 1997. TH Tr. 61-62. See also GEB Ex. 9, 11.
48. 29. Dumo testified that based upon his review of the exhibits, familiarity with the documents and the names of the attendees on the meal charts, it was his opinion as the former Secretary-Treasurer of Local 225 that $8,708.34 in meal expenses incurred by Noble were unauthorized and inappropriately charged to the union. GEB Ex. 22. Dumo excluded from the total any item that appeared to have been related to genuine union work or items where Dumo was unsure of the nature of the expense. Id. Dumo included only those items which can be attributed to Noble personally in an effort to quantify the amount inappropriately spent with respect to meals. Id.
49. 30. The majority of Noble’s food expenditures were not for legitimate expenses for work in the field or while traveling. Noble simply left his office to have breakfast, lunch, or dinner with Local 225 employees and officers. Neither Local 225 nor any of the Local 225 officers offered any explanation as to how the expenses qualified as a bona fide union expense. Such expenses are not legitimate expenses and will be disallowed by the Internal Revenue Service (“IRS”). See Internal Revenue Code § 162(a).
50.
CHARGE IV
51. From in or about July 1997 through in or about August 1997, Leonard Noble, while a member and representative of Local 225, breached his fiduciary duty to all members of Local 225, who are entitled to be reasonably informed as to how Union funds are used, by subjecting the Union to the expense of physical examinations and training for non-union members without obtaining prior authorization or approval from the membership, all in violation of 29 U.S.C. Section 501 (a) and the Financial Practices Section of the Ethical Practices Code.
52.
53.
Physical Examinations
54. 31. Dumo testified that Local 225 received a bill for physical examinations, incurred by Noble, from U.S. Occupational Health at $125 per physical for a total of $4,000. TH Tr. 447-49. GEB Ex. 14. The physical examinations were given to nonunion members as part of a recruitment drive to obtain new members for Local 225. There is no evidence that Local 225 actually obtained any new members from this recruitment drive.
55. 32. When Dumo received the bills, he contacted Veda Cross (“Cross”) at U.S. Occupational Health to obtain an explanation how the union had incurred the expense. TH Tr. 446. Cross told Dumo that Noble had said the local would pay the bills. Id. Dumo spoke with Noble who told him the bills were for the health exams of persons participating in the asbestos and lead removal training. TH Tr. 447.
56. 33. Physical examinations are necessary for union members to obtain work in the fields of lead abatement and asbestos removal. In the past, physical examinations of this type were paid for either by the contractor or the individual laborer, never by Local 225. TH Tr. 319.
57. 34. A question was raised as to the actual going rate cost for such physicals. Williams testified that she knew the cost for a physical examination for both union and non-union members to be $80. Id. Although a determination of the market rate cost is not necessary for this decision, the possible excessive price raises a question as to the bona fide purpose of this training.
58. 35. Dumo had no prior warning that Local 225 was incurring these expenses. The matter was not put to a vote by the membership before the costs were incurred. When the bill was presented to the membership, it was disapproved. TH Tr. 444.
59. 36. John M. Burns (“Burns”) became a trustee of Local 225 in March 1997. Transcript of September 10, 1998 (“Tr.”) 16. At the time Burns became trustee, there were outstanding bills which were under question including the $4,000 bill regarding physicals for laborers. Tr. 16-17.
60. 37. U.S. Occupational Health sued Local 225 in small claims court in Cook County over the $4,000 outstanding bill. Tr. 17. See also Release (Satisfaction) of Judgment, U.S. Occupational Health, Inc. v. Labor Local Union 225, 97 M1 169709 (Cook County Circuit Court, May 16, 1998).
61. 38. Local 225 attempted to defend the lawsuit on the theory that the local was not liable for the charges because Noble incurred the cost on his own and not as a representative of the local. Tr. 17-18. The court rejected the argument and entered a $4,500 judgment against Local 225 which it paid. See Release (Satisfaction) of Judgment, U.S. Occupational Health, Inc. v. Labor Local Union 225, 97 M1 169709. The local also incurred legal fees as a result of the lawsuit. Tr. 18.
62.
Training Expenses
63. 39. Noble, with the support of Galioto, entered into an agreement with Public Health & Safety Inc. to train non-union individuals in the months of June and July 1997. See Unauthorized Expenses, Daniel M. Dumo Statement of November 30, 1998.
64. 40. Dumo testified that a bill for training of nonunion members, as part of the same recruitment drive, was received by Local 225 from Public Health & Safety, a training facility, for a total of $18,490. TH Tr. 449. See also GEB Ex. 16. Dumo had no prior knowledge that Local 225 was incurring this expense for the training of nonunion members. TH Tr. 450.
65. 41. The expense was not put before the general membership before it was incurred. When presented with the bill the general membership rejected it. Id.
66. 42. Fifty-six persons received training with the outside contractor, Public Health & Safety. GEB Ex. 16. Of these, ten individuals were trained in asbestos only, four in lead abatement only, and forty-two in both. Id. None of these individuals joined the union. Tr. 25.
67. 43. Inspector John Dineen (“Dineen”) of the LIUNA Inspector General’s Office (“IG”) testified both at the Trusteeship Hearing and the hearing in the present matter. Dineen stated that he spoke with Anthony Solano who is in charge of the District Council training center located in Streamwood, Illinois. Id.
68. 44. Solano told Dineen that in order to receive training, an individual must be a member of the union, except for lead abatement or asbestos removal training, because a certification and license is required in order to get a job and an individual could not work prior to his certification. Id.
69. 45. Solano told Dineen that the normal practice for training union or non-union recruits is to send all persons to the District Council Training Center and not to an outside contractor. The District Council training center is funded by contractors as part of the collective bargaining agreement. TH Tr. 665. Recruits or union members are trained at the training center, at no charge to the trainee. Id.
70. 46. Solano stated that he received a call from Local 225 requesting permission to utilize an outside training organization “because it was an emergency, they needed some employees within three days for some business that was coming up.” Solano said the training facilities at the District Council were not available at that time. TH Tr. 667.
71. 47. Contrary to the stated three day emergency, Solano said that the training center was billed an additional $8,820 over six weeks beginning June 30th and ending on August 15th. Solano stated the $8,820 bill submitted by the outside contractor to the training center was paid. Tr. 25. See also GEB Ex. 16. The $8,820 bill was in addition to the $18,490 bill which remains unpaid. Tr. 25.
72. 48. Local 225 did not obtain any new members as a result of this recruitment drive. Id.
73. 49. The training center has paid $8,820. The sum of $18,490 remains unpaid and it is likely that Local 225 has not heard the last of this expense. It appears that the creditor may have a reasonable argument that Noble had the apparent authority to obligate the union. A creditor has previously prevailed on a similar theory in the suit for $4,000.
DISCUSSION
The use of union property or funds for personal use
is prohibited by Title 29 U.S.C. §
501(c). Section 501(c) states:
Any person who
embezzles, steals, or unlawfully and willfully abstracts or converts to his own
use, or the use of another, any of the moneys, funds, securities, property or
other assets of a labor organization of which he is an officer, or by which he
is employed, directly or indirectly shall be fined not more than $10,000 or
imprisoned for not more than five years, or both.
Federal courts have previously discussed embezzlement and union funds: “‘The traditional concept of embezzlement comprises (1) a conversion — or, in other words, an unauthorized appropriation — of property belonging to another, where, (2) the property is lawfully in the defendant’s possession (though for a limited purpose) at the time of the appropriation, and (3) the defendant acts with knowledge that his appropriation of the property is unauthorized, or at least without a good-faith belief that it has been authorized.’” U.S. v. Olivia, 46 F.3d 320, 323 (3d Cir. 1996); citing, United States v. Stockton, 788 F.2d 210, 217 (4th Cir.), cert denied, 479 U.S. 840 (1986). (Emphasis added).
In Olivia, the court affirmed Olivia’s conviction for embezzling union funds in violation of § 501(c). Olivia purchased airline tickets for his wife and two children using the union credit card. The court rejected his defense that he reimbursed the union afterwards. Olivia, 46 F.3d at 322. Furthermore, Olivia only offered to reimburse the union after the auditors questioned him about the expense. Id. at 323.
The court used the totality of circumstances test to determine whether or not Olivia had the requisite intent for embezzlement. That test requires that the factfinder examine all evidence in light of all circumstances to determine whether the officers had the intent to convert the union funds to their own use. Id. at 324. The IHO has adopted the totality of circumstances test. See In the Matter of Martire, IHO Order and Memorandum, 96-54D (April 29, 1997).
There is a preponderance of the evidence to prove
that Noble knowingly used the union credit card to make purchases in Paris for
absolutely no union purpose. In his
deposition Noble stated that he knew he was using the union card at the time he
made the charges. Noble claimed that he
used the credit card in order to secure a better exchange rate for himself, not
the union. Regardless of his intention,
Noble made personal charges on the union credit card in violation of the both
federal law and the union policies which he signed. Noble did not offer to repay the union until after he was
confronted about the charges. Neither
intent to repay nor eventual reimbursement excuses embezzlement. At the time of the taking, Noble was well
aware that he was using the union credit card and continued to do so throughout
his trip.
74.
Union officers are obligated to abide by set union policies
in disbursing of union funds. Title 29
U.S.C. § 501 (a) states:
The officers, agents,
shop stewards, and other representatives of a labor organization occupy
positions of trust in relation to such organization and its members as a
group. It is … the duty of each such
person … to hold its money and property solely for the benefit of the
organization and its members and to manage, invest, and expand the same in
accordance with its constitution and bylaws and any resolutions of the
governing bodies adopted thereunder ….
Accordingly, Local 225 Executive Board members such as Noble are bound to
spend union funds as described by the EPC and the LIUNA Constitution.
The Financial Practices section of the EPC states in part: “Union funds are held in trust for the benefit of the membership. The membership is entitled to assurance that Union funds are not dissipated and are spent for proper purposes. The membership is also entitled to be reasonably informed as to how Union funds are invested or used.” In addition, Article IX, Section 3 (a) of the LIUNA Uniform Local Union Constitution states the authority of the Executive Board over a Local’s funds. Article IX, Section 3 (a) states in pertinent part:
75. The Executive Board shall have the authority to make commitments and disbursements in its discretion from the funds, assets and property of the Local Union for the regular, recurrent and incidental expenses of the Local Union. The Executive Board shall further have the authority to make commitments and disbursements in its discretion from the funds, assets and property of the Local Union for organizing strikes, collective bargaining, … charitable contributions … education … and such other expenses and investments as is deems necessary or proper to carry out the objects and purposes of the Union.
76.
77. Article IV, Section 4 H (4) states in pertinent part:
78. Actions of the Executive Board, except for commitments and disbursements for the regular, recurrent and incidental expenses of the Local Union, shall be binding until and unless modified by vote of membership at a meeting of the Local Union when the report of the Executive Board is made to it.
79.
Noble was obligated to have the membership approve the expenses for physical examinations and training prior to expending the money.
The long standing practice and procedure of LIUNA, based upon the foregoing provisions, is to require the expenses, other than regular recurring expenses described in Article IV, Section 4 H (4) to be approved by the general membership prior to expending them or obligating the union to tax them. See IHO Exhibit 1, Affidavit of Michael Bearse, LIUNA General Counsel.
Submitting the proposed expenses to the membership prior to actually incurring them would have prevented the problems that have arisen which are the subject of these disciplinary charges. In cases such as here, where a local union officer, who has apparent authority to bind the union actually incurs the expenses, he will most likely bind the local to pay them, notwithstanding the general membership’s refusal to approve the expenditure.
Noble violated the Financial Practices provision of the EPC and the Constitution by obligating the membership for expenses for physical examinations and training without first informing and obtaining approval from the membership.
Findings of Fact
80. 50. I find that Noble violated his fiduciary duty as a union officer by subjecting the union to the expense for physical examinations, without obtaining prior authorization from the membership, and obligating the union with bills which ultimately caused the creditor to press charges.
81. 51. I find that Noble violated his fiduciary duty by subjecting the union to the expense for training non-union members without prior membership approval, an expense the majority of which ultimately went unpaid.
82. 52. Although Noble may have had legitimate objectives when he began this recruitment drive, I find that by subjecting the union to an expense totaling $31,310 without obtaining prior membership approval is in violation of the Constitution and is evidence of financial mismanagement.
CONCLUSIONS
1. 1. The GEB Attorney has proved by a preponderance of the evidence that Noble engaged in undemocratic practices by offering Mary Williams money to resign from the Executive Board.
2. 2. The GEB Attorney has proved by a preponderance of the evidence that Noble engaged in financial mismanagement and violated federal law by misusing the union credit card to charge personal items to the union.
3. 3. The GEB Attorney has proved by a preponderance of the evidence that Noble engaged in financial mismanagement and violated federal law by abusing the union meal policy.
4. 4. The GEB Attorney has proved by a preponderance of the evidence that Noble breached his fiduciary duty by obligating Local 225 for bills exceeding $30,000 without first informing the membership and obtaining its approval.
DECISION
Charges I-IV have been proved by a preponderance of the evidence. Charge V was voluntarily withdrawn by the GEB Attorney.
PENALTY
1. Noble’s membership in LIUNA is permanently revoked. Noble is permanently barred from holding an office in or being employed by Local 225 or from being an officer or being employed by any LIUNA affiliated entity or fund.
2. Noble has a right to appeal this Order to the LIUNA Appellate Officer by filing a Notice of Appeal with the Appellate Officer within 10 days of the date of this Order.
3. The Appellate Officer is:
4. W. Neil Eggleston, Appellate Officer
5. 1299 Pennsylvania Avenue, N.W.
6. Washington, D.C. 20004
7. (202) 783-0800
8. (202) 383-6610 (fax)
This Order does not take effect until 10 days after the date of this Order, and if appealed, upon the decision of the Appellate Officer.
SIGNED
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PETER F. VAIRA |
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INDEPENDENT HEARING OFFICER |
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Date: April 5, 1999 |
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Daniel A. Braun, Esquire Robert M. Thomas, Jr., Esquire Leonard Noble Local Union 225 |
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[1] Galioto became a member of Local 225 in 1995. He immediately became a field representative and an officer in 1996. The two year membership requirement for eligibility to run for office was waived for Galioto by the International General President. TH Tr. 395.
[2] Under the Constitution, vacancies which occur on the Executive Board are filled by a vote of the other Executive Board members.