Union Leaders Convicted of Racketeering, Fraud, and Embezzlement of Union Dues

Today a federal jury convicted a North Carolina couple, a Kansas man, and an Ohio man in relation to a scheme involving theft of union-member dues through the award of no-show jobs, lavish travels and dinners charged to the union, unearned vacation payouts, and an unauthorized $7 million loan made to a union-related bank.

The jury convicted Newton Jones, 72, of Chapel Hill, North Carolina, the former President of the International Brotherhood of Boilermakers, Iron Ship Builders, Forgers, and Helpers ("Boilermakers Union"), his wife Kateryna Jones, 33, of Chapel Hill, and the former Secretary Treasurer, William Creeden, 78 of Kearny, Missouri, of violation of the Racketeering Influenced Corrupt Organization ("RICO") Act. Those defendants, as well as one of the Boilermaker Union's former Vice Presidents, Lawrence McManamon, 78, of Rocky River, Ohio were convicted of embezzlement from the Union through various means, including:

• Taking elaborate foreign trips that were not related to Union business - all defendants;
• Charging personal expenses to the Union, including shopping trips and dinners out - Newton Jones and Kateryna Jones;
• Paying or overpaying unearned salary and relocation expenses for Newton Jones's family members - Newton Jones and Creedan;
• Paying out of unearned vacation - Newton Jones and Creedan;
• Paying for unauthorized surveillance of Union employees - Newton Jones and Creedan;
• Making an unlawful $7M loan to a bank at which Newton Jones and Creedan were employed - Newton Jones and Creedan;
• Theft from the Union retirement plan - Newton Jones and Creedan;
• Health care fraud relating to unearned benefits provided to Kateryna Jones - Newton Jones, Kateryna Jones, and Creedan; and
• Wire fraud relating to failure to disclose required payments, outside employment, and conflicts of interest - Newton Jones and Creedan.

"The Boilermakers Union members were supposed to get representation out of their hard-earned money used to pay union dues," said Assistant Attorney General A. Tysen Duva of the Justice Department's Criminal Division. "What they got instead is their money wasted on lavish trips and dinners, and unearned vacation payouts for the union leadership. Union dues must be handled with care and used for the benefit of the dues paying members. Union leadership that steals from the American worker will face prosecution, conviction, and prison time."

"The absolute hubris and entitlement with which these defendants stole from American workers is disgraceful," said U.S. Attorney Ryan A. Kriegshauser for the District of Kansas. "While union members were faithfully clocking-in and out of their jobs, these defendants thought they were unaccountable and were callously gallivanting on extravagant trips that spared no expense. With these convictions comes a reckoning, and we will be asking the Court to hold these defendants accountable for their criminal conduct and impose appropriate sentences of incarceration."

"By using union funds for their private benefit, the fraud committed by these defendants strikes at the very confidence union members place in their leaders to represent their interests," said Special Agent in Charge Chris Omerod of the FBI Kansas City Field Office. "The evidence presented in trial demonstrated an elaborate and willful deceit of the Boilermakers Union to fund the lavish lifestyle of their former leaders. The FBI will not tolerate this level of financial exploitation against hard working Americans."

"These union officials clearly violated LMRDA fiduciary requirements with their excessive and extravagant spending and caused great harm to their organization and its members," said Department of Labor (DOL) Office of Labor-Management Standards Director Elisabeth Messenger. "The conviction of these individuals serves as a strong warning to those who abuse their responsibilities that such violations of union members' trust will lead to serious repercussions. The department's new reporting requirements for large unions will go a long way in protecting the financial integrity of labor unions."

"Investigating corruption and ensuring the financial integrity of private health and pension plans, including union plans, is a priority for EBSA," said DOL Employee Benefits Security Administration Assistant Secretary Daniel Aronowitz. "In this case, Boilermakers officials put their own interests first and misused funds entrusted to them to provide retirement and health benefits for union members and their families. EBSA will pursue those who engage in criminal schemes to defraud private sector benefit plans. We are very pleased to have had the opportunity to work collaboratively with our law enforcement partners."

According to evidence presented at trial, over a 15-year period, the defendants, led by Newton Jones and Creeden, embezzled the funds of the Boilermakers Union including:

• Over $5 million in unnecessary luxury international travel;
• Nearly $2 million in salary and benefits to Kateryna Jones and others for no-show jobs, at which they were not required to work, including payment of two years of salary to Kateryna Jones for a period when she resided in Ukraine and was dating Newton Jones;
• Over $100,000 in tuition, rent, and relocation expenses for members of the family of Newton Jones;
• Hundreds of thousands of dollars in cash payments relating to fraudulently claimed vacation time;
• Over $100,000 in restaurant charges by Newton Jones and Kateryna Jones in their hometown;
• Money spent in unauthorized email surveillance of union employees to defend Newton Jones and McManamon from internal union charges; and
• $7 million in unauthorized loans from the Boilermakers Union to the bank at which Newton Jones and Creeden had supposed full-time jobs that required little work and were each paid nearly $500,000 per year while they were also being paid a full-time salary from the union.

Trial evidence showed that Newton Jones hired his wife Kateryna Jones for a job in which she performed little to no work and received nearly $1.8 million in salary over the course of nine years. Newton and Kateryna Jones also embezzled over $160,000 for date night meals in their hometown of Chapel Hill. Newton Jones and William Creeden embezzled hundreds of thousands of dollars in salary and benefits for three of Newton Jones' family members. These defendants also embezzled hundreds of thousands of dollars in the form of improper vacation payouts.

In addition, the couple embezzled millions of dollars in unnecessary and lavish international travel from the dues of union members, including conducting executive meetings for no apparent purpose in extravagant hotels in cities like Paris, France and Rome, Italy.

Creeden and Newton Jones also used their executive positions in the Boilermakers Union to obtain high-level positions at the Bank of Labor, where the union is the majority shareholder. Earning a full-time salary at the bank while supposedly working full-time at the union, Jones and Creeden were paid nearly $4 million in salary and $1.4 million in retirement benefits from the bank.

A sentencing date has been set for Sept. 1. Lawrence McManamon faces a maximum of penalty of five years in prison on each count. William Creeden, Newton Jones, and Kateryna Jones each face a maximum penalty of 20 years in prison. A federal district court judge will determine any sentence after considering the U.S. Sentencing Guidelines and other statutory factors.

The Department of Labor and the FBI investigated the case.

Senior Litigation Counsel Vincent Falvo and Trial Attorney Alexandra Swain of the Criminal Division's Violent Crime and Racketeering Section and Assistant U.S. Attorneys Faiza Alhambra and Jabari Wamble for the District of Kansas prosecuted the case.