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XIV. Check No. 443, dated February 22, 1971, drawn on the account
of Executive Life Insurance Company of New York, payable
account of Trans World Life Insurance Company, payable
to Viscount Agency, in the amount of $30,000..
of Trans World Life Insurance Company, payable to Dina
Dina Gelman Agency, in the amount of $20,000.
June 16, 1972; July 28, 1972; and September 8, 1972.-
Seymour Greenfield was certified as secretary of the Modern
Agency, Inc., and its sole signator..
of Viscount Agency opened a personal checking account....
of the Executive Life Insurance Company of New York,
payable to Cy R. Snyder Agency, in the amount of $150,000.
drawn by Michael McEnroe, payable to S. Greenfield, in the
payable to H, Brown...
account of the Modern Agency, Inc., care of Seymour Green-
Page 156 157
XXVI. Check No. 23345, dated January 14, 1972, drawn on the account
of Trans World Life Insurance Company, payable to Dina
amount of $25,000_
Dina Gelman Agency, payable to Trans World Life, in the
World Life, in the amount of $50,000.
Feldman to Harry Davidoff and Louis Ostrer.
"Local 295 Severance Trust Fund, Selection of Insurance
February 1, 1973.-
Velie, Reader's Digest, August 1974..
Local 295 Severance Trust Fund, April 18, 1974.
issued March 4, 1976..
AN AGREEMENT IS REACHED
Harry Davidoff and Louis Cuple Ostrer were men with different backgrounds. Davidoff was a tough, plain spoken labor leader who had grown up on the streets of New York. Ostrer, who had come to the United States from his native Rumania, was an insurance executive with a penchant for abstract thought and for making complicated actuarial theories easy to understand. But in the fall of 1970 these two men who seemed to have so little in common came together and made an agreement.
Their plan was simple enough. Davidoff would use his considerable influence as secretary-treasurer of Teamsters Local 295 to persuade his membership to adopt Ostrer's new concept of severance pay and life insurance for workers.
The plan was accepted. In December of 1970, the union contract contained a severance fund provision and Louis Ostrer was put in charge of managing the fund as well as overseeing the insurance feature.
However, the agreement between Davidoff and Ostrer and the severance fund-life insurance program that resulted from it-set off controversy and raised serious questions. Soon the severance fund-life insurance plan became the subject of inquiry by the Senate Permanent Subcommittee on Investigations.
In addition, Harry Davidoff and Louis Ostrer themselves became subjects of Subcommittee inquiry. For, in spite of their differing backgrounds, they did have some things in common. They were both felons. They both had ties with organized crime. And neither of them should ever have been entrusted with responsibility for millions of dollars in labor-management trust funds.
Although no hearings were held, the staff completed its investigation and compiled its case. What follows is the study by the staff of the Senate Permanent Subcommittee on Investigations of the severance trust fund and its life insurance benefit of New York Local 295 of the International Brotherhood of Teamsters, Chauffeurs, Warehousemen and Helpers of America.
ORIGIN OF INVESTIGATION AND SUBCOMMITTEE'S JURISDICTION The Senate Permanent Subcommittee on Investigations of the Committee on Government Operations is, by present and past Senate resolutions, authorized to examine alleged criminal activity in labormanagement relations.
In February of 1971, the Subcommittee began a preliminary inquiry into the severance fund of Teamsters Local 295.
The Subcommittee's interest in Teamsters Local 295 was prompted by information which alleged that the local's severance trust fund was being managed with questionable procedures and policies.
It was alleged that because of these questionable practices the members of Local 295 were being deprived of benefits due them. It was further alleged that certain leaders of the local and certain of the leaders' business associates were profiting illegally or unethically from severance fund operations.
DEFINITION OF SEVERANCE TRUST FUNDS
A severance trust fund is a fund of money usually created as the result of a labor agreement, from which cash payments or other benefits are provided qualified employees upon termination of their employment with a covered employer, in accordance with a severance pav plan. In most cases, the plans are jointly administered.
The payments, usually in lump sum, are made to employees when they quit their jobs or are fired or laid off. In the event of death, the employees' beneficiaries receive the severance fund payment.
Severance funds are financed by contributions from management alone or from management together with union members. The funds are controlled by trustees who represent both management and labor, or management alone.
Payment to employees from the severance trust fund is commonly referred to as "severance pay." Severance pay is usually a "fringe benefit;" that is, it is a benefit unions win for their members in addition to higher wages. Examples of other major fringe benefits are retirement pensions, health and life insurance programs, vacations, annuities and savings programs and apprenticeship training.
BRIEF HISTORY OF SEVERANCE PAY PLANS
At the Subcommittee's request, the Economics Division of the Congressional Research Service of the Library of Congress prepared a brief history of union severance trust funds in the United States.'
The first severance pay plans were started in the early 1920's when a form of lay-off notice payments were made to employees by certain companies. The companies implementing these plans were large, had mostly white collar employees, had small labor costs and did business for the most part in noncompetitive markets.
In the mid-1920's, several unions began to include severance pay provisions in their negotiated contracts. In 1925, for example, the International Ladies Garment Workers Union reached an agreement with the New York Dress Manufacturers Association in which at least two weeks' wages were paid to workers displaced by labor-saving devices. Employees laid off because of shop reorganization were to be paid from one to four weeks' wages depending on their length of service.
In 1926, the Amalgamated Clothing Workers negotiated a plan with Hart, Schaffner and Marx to pay 236 displaced cutters $500 each. The money was paid from funds contributed by the company and by cutter's remaining on the job.
In May of 1936, railroad unions and the railroad industry signed the Washington Job Protection Agreement in which it was stipulated that
1 Memorandum of August 27, 1975 entitled, “Information relating to severance pay fund," prepared by Charles !'. Ciccone, Specialist, Labor Economics and Relations, Congressional Research Service, Library of Congress, for the Senate Permanent Subcommittee on Investigations.
workers laid off because of consolidations would receive 60 percent of their average monthly pay for periods varying according to their length of service.
In 1940, the Congress amended the Interstate Commerce Act to provide pay protection to workers let go because of mergers. In 1944, the policy was extended to workers displaced because of abandonment of railroad lines.
The Communications Act of 1934 was amended in 1943 so that workers fired due to mergers of telegraph companies would receive one month's pay for each year of seniority.
During World War II, controls on wages triggered new efforts toward better employee benefits. Moreover, workers and union leaders feared that mass layoffs would occur when the war ended. These factors led to demands for severance pay benefits.
Accordingly, the War Labor Board ordered adoption of a plan giving employees displaced by post-War plant shutdowns at least four weeks' pay for workers with 10 or more years of service.
Since 1944, there has been a slow but steady rise in the number of negotiated severance pay plans. Government figures, compiled by the Bureau of Labor Statistics, show that in 1944 only 5 percent of the agreements studied contained severance pay provisions. Only a few industries, notably the newspaper publishing and railroad industries, had adopted the principle of severance pay to any considerable extent.
By 1949, 168–or 8 percent-of the 2,137 agreements studied provided for severance pay. These contract provisions tended to be in the communications, rubber, printing and publishing industries.
Some 266—or 16 percent-of 1,693 labor-management agreements covering 1.75 million workers contained severance pay benefits in the period of 1955 to 1956. Half of these agreements were in the communications, primary metals and electrical machinery industries.
While the severance pay contract provisions went from 5 percent to 16 percent from 1944 to 1956, this was a relatively slow pace when compared to the spread of pension plans and health and insurance programs built into collective bargaining pacts of the same period. However, the need for severance pay plans had been lessened somewhat by the post-War increases in supplementary unemployment programs and the enactment of unemployment compensation ws. But severance plans did continue to grow.
In the 1958 áuto workers negotiations, severance pay arrangements were integrated into the supplementary unemployment benefit program. The International Ladies Garment Workers Union won acceptance of a widely praised severance pay plan in their 1958 negotiations. And other unions, especially in the electrical and maritime industries, also included some form of severance pay protection in their contracts.
By 1971, severance pay plans were found to be in use in 237-or 38 percent-of the 620 selected labor contracts examined by the Bureau of Labor Statistics.
Several factors have contributed to the growth of severance pay plans.
First, union leaders consider the severance issue of special significance to older workers who feel that it would be more difficult for them to find new employment should they lose their jobs,