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A severance pay plan, by definition, must at all times be fully funded. Ostrer obscured that fact by encouraging his audiences to confuse severance pay with pension plans. The two are not comparable.

A severance pay plan has no "past service obligation.” It is--as asserted in the Local 295 contract and in other similar arrangementsa fund obligated to pay the entire amount contributed by management to each employee upon severance. It is similar to the keeping of a separate bank account for every member.

On the other hand, a pension plan often does not reach full funding for many years because it assumes obligations which extend back in time before its creation and relies on the fact that most participants will not be vested or retire for many years. Therefore, the Ostrer severance system-as portrayed by Louis Ostrer--compared favorably with pension funds; his fund was to be fully paid up in some 10 years.

But severance funds are not pension funds. If, for example, the trustees of a comparable welfare benefit such as health care are expend $500,000 for medical expenses for the membership for the year, funds available should be approximately $500,000.

What Ostrer promised, in reality, was to achieve a return of the money he planned to lavish on excessively costly life insurance. He was promising to pay back to the truck drivers in 10 years what was theirs from the beginning. Louis Osterer's proud claim that it would be fully funded in a decade had a hollow ring.


It was the Subcommittee's hope that persons involved in the creation and management of the Local 295 severance trust fund would contribute their own views in this staff study. Consequently, the staff asked Louis Ostrer and Harry Davidoff to give final interviews at which time the most serious questions about the fund could be raised and Ostrer and Davidoff would have a chance to give their side of the severance fund story.

Certified letters from Subcommittee Chief Counsel Howard J. Feldman were sent March 30, 1973 requesting these meetings. Neither of the letters was answered.93


Louis C. Ostrer and John (Johnny Dio) Dioguardi were engaged in questionable stock transactions at the approximate same time that the Local 295 severance fund-life insurance program was being implemented.

Ostrer and Dioguardi were charged in a 40-count indictment May 27, 1971 in which it was asserted that they had violated federal securities laws and federal mail and wire fraud statutes, Seven other persons were also charged.

On January 26, 1973, a jury found Ostrer guilty on 11 counts and Dioguardi guilty on four counts (361 F. Supp 954). On April 12, 1973, Judge David N. Edelstein of the United States District Court for the Southern District of New York sentenced John Dioguardi to nine

* Separate letters each dated March 30, 1973 from Howard J. Feldman to Harry Davidoff and Louis Ostrer. (See Appendix XXIX.)

years' imprisonment and a $30,000 fine and Ostrer to three years' imprisonment and a $55,000 fine.

On January 4, 1974, the convictions of Dioguardi and Ostrer were sustained by the United States Court of Appeals, Second Circuit.

Ostrer still remains free pending further appeal of his conviction. Dioguardi is presently incarcerated at the Federal penitentiary at Lewisburg, Pa.

Details of the scheme of Ostrer and Dioguardi in the Belmont stock case are reported in the opinion of the United States Court of Appeals, Second Circuit in U.S. v. Dioguardi (492 F. 2d (1974)). Evidence in the case revealed a plan to manipulate the price of the stock of the Belmont Franchising Corporation, a substantially worthless over-the-counter security; the book value of the stock was almost negligible. Belmont's assets were essentially paper holdings in other concerns. The stock had been traded for only a short time for at most a few dollars a share.

in January of 1970, Michael Hellerman, who pleaded guilty and testified for the government, began steps to drive up the price of Belmont stock, first to $5 or $6 a share and then to nearly $50 a share. At that time, two alleged stock manipulators, Anthony Soldano and Fred Goodman, together with Hellerman, began to buy virtually all of the 28,720 known publicly tradeable shares of Belmont.

Goodman and Soldano executed their purchases ostensibly through the open market, using brokers who quoted prices for Belmont through the National Quotation Bureau's pink sheets for over-the-counter securities. These purchases created the appearance of an active public market in the stock.

By early March of 1970, Goodman and Soldano allegedly had caused the market price of Belmont as quoted in the pink sheets to reach $15 a share. They did this primarily through directions to their brokers, who traded small quantities of the stock among themselves. In the meantime, Goodman and Soldano had acquired, they believed, control of all the outstanding stock.

At this point Hellerman's role became more important. According to his testimony, he already had an understanding with John Dioguardi that "whatever I did in the future . . . he would have 25 percent.” It had also been agreed between Hellerman, on one side, and Goodman and Soldano on the other that once the price of Belmont stock reached $15 Hellerman and his associates would purchase all the stock at the $15 level, with a $5 per share kickback, prior to further manipulation upwards.

In confirming this arrangement with Goodman and Soldano, Hellerman took Soldano to Dioguardi's office "to make sure it was on the record."

According to Hellerman, it was at this time in early March that he brought Ostrer into the scheme, although the two had only known each other a short time. Ostrer agreed to commit himself to buy 14,000 shares of Belmont at $15 a share, for a total of $210,000, with the understanding that he would split any future profits with Hellerman, that Hellerman would guarantee him against loss and that a loan of the purchase money would be arranged so that he would not have to "lay out a quarter of the $210,000.

Purchase orders in Ostrer's name or in his behalf were to be made through various New York Stock Exchange firms.

Ostrer then placed orders in his own name and in the name of his sister, Mrs. Dina Gelman, for 14,000 shares of Belmont. However, most exchange firms which Ostrer approached refused to accept his orders and he was forced to place relatively large block orders through firms where brokers were already in league with Hellerman.

Meanwhile, Hellerman made arrangements with other persons to purchase the remaining 14,000 shares of Belmont. These persons were able to pay the selling brokers at the $15 a share price. But Ostrer was unable to raise the $210,000 needed to "hold up” his end of the deal.

This development left his brokers unpaid. According to Hellerman, he then obtained a loan for Ostrer through Dioguardi. These funds, totalling $60,000, came from Anthony (Hickey) DiLorenzo, at an interest rate of 14 percent a week. DiLorenzo also demanded and received $24,000 from Hellerman. In addition Hellerman also advanced Ostrer $52,500 and Ostrer obtained the balance he needed from other


From the end of March through late April of 1970, Hellerman directed purchases and sales of Belmont stock at ever-increasing prices among the individuals and brokers he controlled. He kept Dioguardi, Ostrer and DiLorenzo informed as the price rose. He also arranged for Ostrer to sell off enough stock, through a nominee, to repay the $60,000 loan from DiLorenzo-with a $1,700 profit left over which he split with Ostrer.

By the end of April of 1970, Hellerman had received about $140,000 in kickbacks from Goodman and Soldano. He gave $30,000 to Dioguardi and invested $9,000 more in a business in which Johnny Dio had an interest.

In early May of 1970, the scheme failed. The president of Belmont, through a broker unknown to the manipulators, began to sell heavily his own “investment” stock in the corporation. The market was unable to absorb the sales. Hellerman was unwilling to buy the stock and could not find other purchasers. The market for Belmont collapsed, leaving Ostrer and others with large quantities of unsold stock. Ostrer then tried to hold Hellerman responsible for his losses. Hellerman became worried because Dioguardi took Ostrer's side. Dioguardi arbitrated the dispute to some extent and arranged for partial compensation to Ostrer in the sum of $25,000.

At the trial, Dioguardi called no witnesses. He based his defense primarily on cross-examination going to the lack of credibility of the government's major witnesses, all of whom were accomplices. Ostrer did not testify but he did call two witnesses whose testimony indicated that Ostrer had been a “victim” of Hellerman's manipulations.




Early in 1973 the board of trustees of the Local 295 severance fund took steps to improve the fund's procedures and insurance benefit.

Fringe Programs, Inc., was dropped as administrator of the fund January 16, 1973.94

The trustees voted to end the practice of buying individual life insurance policies for the union's members on February 20, 1973. A single group term insurance contract, effective March 1, 1973, was purchased with the Prudential Life Insurance Company.

Accordingly, no agent or broker was involved in the purchase of the group term policy, thereby eliminating the high commissions paid under previous policies.

Under the new group plan, each member, regardless of age, was insured for $30,000.

The trustees also amended the rules and regulations of the severance fund so that payment of the death benefit would be made in lump sum and in full.96

JAMES HOFFA'S BOOK Before his disappearance July 30, 1975, James R. Hoffa, the International Brotherhood of Teamsters former president, wrote a book entitled, Hoffa: The Real Story." The book was written in collaboration with Oscar Fraley, a former sportswriter who also wrote The Untouchables and other books.

In his book, Hoffa was critical of his successor, Frank Fitzsimmons, and charged that Fitzsimmons, as Teamsters president, allowed organized crime figures to bilk Teamsters of large amounts of money. Hoffa asserted that Fitzsimmons had been guilty of "selling out to mobsters and letting known racketeers into the Teamsters."

Citing the Local 295 severance fund, Hoffa called attention to Louis Č. Ostrer's role in an insurance plan that resulted in a $1.1 million “rip-off” of Teamsters members in the local which was "dominated by labor racketeer Harry Davidoff.”


In the August 1974 issue of Reader's Digest, longtime labor rackets investigative reporter Lester Velie reported on the severance fund-life insurance benefit scheme which Louis Ostrer devised.98

· Letter of January 16, 1973 from Michael Hunt to Fringe Programs, Inc. (See Appendix XXX.)

9 Subcommittee memorandum of February 21, 1973 entitled, "Local 295 Severance Trust Fund, Selection of Insurance Carrier by Trustees of Fund," from Maurice Frame to John P. Constandy. (See Appendix XXXI.)

** Amendment to Local 295 Severance Trust Fund, effective February 1, 1973. (See Appendix XXXII.) 67 Hoffa: The Real Story, by James R. Hoffa, as told to Oscar Fraley. 18 “The Mafla Tighten Its Grip on the Teamsters" by Lester Velie, Readers Digest, August 1974, p. 99. (See Appendix XXXIII.)


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Velie reported that the scheme first employed at Local 295 in New York was then put into practice in 60 or 70 Teamsters locals in Michigan, California, Nevada, New Jersey, Illinois and Florida.

Velie said Ostrer got the go-ahead to promote his severance fundinsurance plan from Frank Fitzsimmons. Velie said Ostrer hired Fitzsimmons' son, Don Fitzsimmons, as a "consultant and public relations man."

APRIL 18, 1974 CITATION On April 18, 1974, the New York State Insurance Department issued a citation charging that the Local 295 Severance Trust Fund had been improperly structured and managed. Named in the action were 10 trustees of the fund and Louis C. Ostrer, Dina Gelman, Cy Reeves Snyder, Seymour Greenfield, Viscount Agency, Inc., Fringe Programs, Inc., Executive Life Insurance Company of New York and Trans World Life Insurance Company of New York." The state insurance department citation was authorized by Superintendent of Insurance Benjamin R. Schenck and signed by Sidney B. Glaser, Associate Counsel for Welfare Funds.

Ostrer and the others were charged with having "willfully and/or wrongfully and/or negligently failed to comply with" New York State insurance laws, the result of which was the depletion of the assets of the severance trust fund in the amount of $1,185,728.

Among the charges levelled by the insurance department were assertions that the whole life policies were "excessively costly,” that no accredited actuarial consultant was brought in to evaluate the severance trust fund's life insurance benefit, that Louis C. Ostrer lost his license to sell insurance due to questionable practices in the 1960's, that the trustees should have checked into Ostrer's past and learned of his felonious background.

In addition, the insurance department's citation alleged that Cy Reeves Snyder, Dina Gelman, Louis Ostrer, Executive Life, and Trans World Life were involved in transactions they knew to be improper in connection with the purchase of the whole life policies; and that they, in fact, fronted for Ostrer in the solicitation and sale of the severance fund insurance program.

The state insurance department charged that Louis Ostrer and the others named in the citation had, by their actions in the Local 295 Severance Trust Fund, showed a "pattern of gross neglect, incompetence, mismanagement and imprudence” and were guilty of “willful

Louis C. Ostrer and the others were ordered to appear at proceedings of the New York State Insurance Department beginning May 21, 1974.

Nearly two years later-on March 4, 1976—the New York State Insurance Department announced it had recovered $200,000 to be returned to the Local 295 severance trust fund.?

Superintendent of Insurance Thomas A. Hartnett said the recovery was made according to an agreement entered into by the department with 10 trustees of the fund and the two insurers, the Executive Life

State of New York Insurance Department Citation regarding Local 295 Severance Trust Fund, April 18, 1974. (See Appendix XXXIV.)

News release of the State of New York Insurance Department issued March 4, 1976. (See Appendix

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