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WASHINGTON — “There is more involved than this round of arrests,” said Norman S. Transeth, special agent-in-charge of Labor’s Office of Labor Racketeering.
The charges brought Tuesday against 17 executives and employees and two union local officials were characterized by Transeth as the first phase of an ongoing probe into what he described as a common practice in the New York garment industry.
“Basically, a lot of the manufacturers were bribing union officials to be able to use non-union workers and to avoid paying into the health and welfare pension plans of the union,” said Transeth, in a telephone interview from his New York office.
“We think it’s probably endemic to the industry,” Transeth said, noting that operating a non-union shop with the cooperation of a union is a scheme known in the industry as “double breasting.” He said this frequently entails a contractor opening a non-union shop on the side while running a long-established business that’s organized.
“It goes the full scale from the mom-and-pop up to the top, to varying extents,” Transeth said of the presence of double breasting in the industry.
The arrests of officials from the ILGWU Local 10 and seven apparel contractors topped off the two-year probe in which investigators set up a fake contracting shop, Brain Cutting, on the third floor of 341 West 38th Street in New York’s garment district.
There, and in other meeting places, two officers videotaped and recorded illegal deals being made. The inquiry focused on all ends of the women’s wear industry.
“We would assume whatever persona we would need,” Transeth said of the role-playing by the two undercover officers who ran the undercover contracting business. “If we had to say whatever, we would say that.”
Transeth said scattered tips from the union and contract employees led investigators to open this full-scale inquiry into the garment industry.
He said through plea agreements with defendants, prosecutors plan to leverage information in order to sting others in the industry. Transeth said he was unaware whether organized crime was a part of the current inquiry, but that a lot of the alleged wrongdoing in this case followed sophisticated techniques used by the mob.
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For example, in order to cover up bribe payments, contractors would create phantom jobs or positions where employees would get paid, but would never have to work.
Payment deals were also allegedly worked out to share the savings gained by not contributing into an employee’s union-mandated health, pension and vacation funds, Transeth said. He said the motivation in the scheme was largely to line the pockets of its participants and not to be more competitive in the industry by lowering the cost of apparel.
“Ultimately, nobody gets a few dollars off a dress they buy because someone isn’t paying into the pension fund,” Transeth said. “I don’t think the money goes down to the price tag. I think that would be a very hollow defense.”
Charges facing the defendants fall under federal anti-racketeering and mail fraud laws, Transeth said. Other charges may follow, such as tax evasion and wage and hour violations, he said.
— Fairchild News Service