June 14, 2019, 4:08 p.m.
BY BRIAN HEWS
Hews Media Group-Los Cerritos Community News has obtained a written decision showing that Hawaiian Gardens Local 3624, who’s president is Hawaiian Gardens resident Fred Licon, was placed under receivership/administratorship after allegations of serious financial fraud and administrative irregularities were levelled against Licon.
AFSCME President Lee Saunders placed 3624 under emergency receivership in January of this year and named Field Services Director Kevin Brown as the administrator after the allegations surfaced.
In imposing the administratorship Saunders stated, “In my opinion an emergency situation exists in Hawaiian Gardens….the local is threatened, the funds and assets of the local is threatened, and the local is acting in violation of the International Constitution.”
After the declaration of receivership, a hearing was called with an administrative judge present, to approve the receivership.
The first person to testify, under oath, was Council 36 Staff Representative Pete Schnaufer, who leveled serious allegations of financial fraud against Licon.
Schnaufer also indicated that Licon attempted to cover-up the fraud by failing to follow administrative procedures under the Union’s International Constitution.
Local union president’s terms are for one year, with elections occurring in March, yet Schnaufer testified that Licon had not called an election in almost two years.
Schnaufer told the court, “I raised the issue a number of times with Licon but he never called for a new election.”
He also testified that Licon, contrary to union rules, did not call regular membership meetings, and if there was a meeting, the minutes were not provided.
Minutes are a hand-written documentation of important points or actions taken at a meeting.
More worrisome is the fact that when the meetings did occur, the Treasurer’s Report was never presented.
Then Schnaufer dropped two fraud bombshells that could land Licon in legal hot water.
Schnaufer described the establishment of a separate bank account in the local’s name and that “another donor” had been making contributions to the account.
Schnaufer indicated that the money from the slush fund was used to fund local sports teams and charities and were ”directly linked” to Licon and other executive board members, implying that Licon and others took personal credit for the charitable donations.
No documentation or receipts for the transactions existed, nor was there approval for the expenditures, according to Schnaufer.
Later he identified the “other donor” as Advanced Engineering Solutions, a company he said was under investigation by the FBI for the illegal contracts.
Schnaufer also said that a large amount of cash was withdrawn from the union account without documentation or authorization.
“$38,000 had been appropriated out of the account by Licon without authorization or supporting documentation,” Schnaufer told the court.
He also cited that fact that Licon took $6,000 in cash from the local’s regular account for himself and six other board members for the International Union Convention in Boston in 2018.
Testimony that $38,000 was taken out of the account without documentation.
“No receipts were provided to document the expenditures,” stated Schnaufer.
Finally, Schnaufer said that only one full financial report and one partial financial report had been filed with the union over the past three years, and no financial audit had been conducted in accordance with the union’s financial standards code.
In his testimony, Licon blamed Schnaufer for the union’s woes saying, “it was caused by tension between me and Schnaufer…he [Schnaufer] is dishonest and lies.”
“Schanufer did not bring all these problems up until I tried to fire him,” Licon testified.
Yet, according to people familiar with District 36’s operations, Licon had no authority to fire Schnaufer.
Licon also testified that he had all the receipts for the Boston convention, but did not offer additional evidence to counter the other allegations of fraud and abuse leveled by Schnaufer, including the slush fund.
HMG-LCCN questioned Licon about Schnaufer’s allegations via a text message.
Licon told HMG-LCCN that, “the [International Union’s] audit will exonerate me. This is all political, three members of the union want to take control.”
“The audit is already done,” a high-level source within the City told HMG-LCCN.
Licon did not answer additional questions about the financial abuse allegations.
Partial statement from documents affirming receivership.
In his final ruling, Administrator Brown blasted Licon and the trustees for their actions.
“It is uncontested that local 3624 is not in compliance with the AFSCME Financial Standards Code regarding expenditure of monies. Money has been withdrawn as cash for the alleged payment of union expenditures without proper documentation and authorization by either the local executive board or membership.”
“The trustees have not fulfilled their function of performing audits of the union’s finances or causing those audits to be performed.”
“Money has been received from outside sources deposited in a separate bank account in the name of the union however the proper safeguards for the receipt and expenditure of funds from these donations has not been implemented.”
“Based on the foregoing, it is the decision of the administratorship that President Saunders acted appropriately in imposing an administratorship on local 3624.”
Sources have told HMG-LCCN that after the hearing, an investigation into the allegations and several financial and administrative training programs were established and completed.
Everyone involved, with the exception of “high-level personnel,” was cleared of any wrongdoing.
