GOP Seeks Probe of AFL-CIO on Coalition

Posted March 18, 2005 at 5:56pm

Republican leaders of the House Education and the Workforce Committee on Friday asked the Labor Department to investigate what they called potentially illegal efforts by the AFL-CIO to pressure financial services firms to withdraw their support for President Bush’s Social Security reform plans.

The organized labor umbrella group this year has staged protests outside the headquarters of leading Wall Street firms belonging to the business coalition backing the president’s approach and convinced two of them, Edward Jones and Waddell Reed, to pull out.

In a letter to Labor Secretary Elaine Chao, committee Chairman John Boehner (R-Ohio) and Rep. Sam Johnson (R-Texas), chairman of the panel’s subcommittee on employer-employee relations, charge the AFL-CIO with possibly breaking federal labor laws by making investment decisions based on politics.

“When union leaders and pension plan trustees base investment decisions on politics, we question how they can do so lawfully in the face of statutory requirements that such decisions be based on the economic and fiduciary best interests of beneficiaries and participants,” they wrote in the letter.

AFL-CIO associate general counsel Damon Silvers dismissed the charges as baseless.

“Every statement in the letter about the law is either confused or wrong or both,” he said. “The privatizers have turned to their usual war chest of abuse of power and intimidation, instead of taking on the issues.”

Labor officials, meanwhile, are “looking into this matter,” according to a statement.

“We take this request to investigate the reported alleged impermissible activity by the AFL-CIO and labor leaders very seriously,” the statement from a department spokeswoman said.

The charge comes as the battle between groups aligned on either side of the Social Security debate intensifies.

Last week, the AFL-CIO announced it had knocked the Financial Services Forum out of the business-backed coalition raising money to promote the president’s plan. That group — the Coalition for the Modernization and Protection of America’s Social Security — is led by Derrick Max, who also serves as executive director of the Alliance for Worker Retirement Security, the lobbying coalition quit by Edward Jones and Waddell Reed.

The AFL-CIO said Friday’s letter would not deter its campaign to sideline other Wall Street firms still active in the debate. The labor group is going ahead with plans for a March 31 “National Day of Action,” during which activists will protest such financial services companies as Charles Schwab. The investment house last week told The Wall Street Journal that, due to pressure it already felt from labor protesters, it was not endorsing the creation of personal accounts in the federal retirement program.

The labor group has indicated it would consider pulling its worker pension fund business from financial services firms backing personal accounts. Boehner’s letter cites a January comment by AFL-CIO lobbyist Gerald Shea to Roll Call, in which Shea said his group has “no intention of letting any of these companies get away with this while they manage our workers’ funds.”

Last Friday, Silvers added the group has an obligation to warn pension fund managers it believes are acting against the interest of workers.

“It appears to us Boehner thinks pension funds shouldn’t protect their money if doing so might annoy Derrick Max or President Bush,” he said.