Critics See a Conflict in Union Contract
Inquiry Focuses on Choice of company to
Manage Pension Fund
by SELWYN RAAB The New York Times August 9, 1999
In June 1998 the carpenters anion in the New York metropolitan area hired
a financial services company, Zenith Administrators Inc., to oversee. pension and benefit
payments to 26 000 active and retired members
Now after a torrent of complaints about Zenith's management of the funds totaling $1.7
billion. Federal prosecutors and the Labor Department are investigating complaints that
the company may have obtained the contract through favoritism. Critics within the union
have said they suspect that the contract was improperly awarded because the president of
the national carpenters union, Douglas J McCarron. is a director of the holding company
that owns Zenith Administrators.
Before hiring Zenith the union, the District Council of Carpenters and joiners,
administered five funds for 18000 active members and 8,000 retirees through its employees
at the councils offices in Manhattan. In addition to pensions, the funds Cover payments
for health care, vacations and annuities.
Critics of the contract asserted in interviews that Zenith was selected at the urging of
Mr. McCarron, Who is the general president of the United Brotherhood of Carpenters and
Joiners of America he is a director of ULLICO Inc the company that Owns and controls
ULLICO. whose original name Was the United Labor Life insurance company. was formed in
1925 to provide, low-cost insurance to Union members and is now the holding company for
Zenith as well as a private capital investment fund and an insurance company. Mr. McCarron
and other union officials, as ULLICO's directors, determine policy and select the
Richard Esposito. a spokesman for Mr. McCarron and the district council, denied that
Zenith was chosen through Mr. McCarron's intervention. "It is not a conflict of
interest for him to be a director of a company that has a subsidiary" Mr., Esposito
said. He said Mr. McCarron received $1,000. a month as a ULLICO director and got no
payment from Zenith.
Mr. McCarron is also one of 12 trustees who supervise the benefit funds in New York and
chose Zenith over two other companies that had sought the Contract to manage the funds.
According to officials of the district council. Mr. McCarron excused himself from the
selection process and did hot participate in the boards unanimous vote in favor of Zenith.
Officials of the council and Zenith declined to disclose the fees that Zenith receives for
administering the funds. Patrick T. Connor a lawyer for the carpenters national
union, said that Zenith's bid for the contract was not the lowest but that the trustees in
New York favored it because the company had a larger staff than its rivals and had wide
experience through the management of 71 other pension and welfare funds"We are very
confident there will be no finding of any impropriety" said John Rogers, a spokesman
for Zenith and Union in Washington. Mr. Rogers also declined to say how much the union is
Mr. Esposito acknowledged that members of the carpenters union from the New York region
had registered about. 9,000 complaints with the United States Labor Department, concerning
Zeniths performance. the Complaints. he said, were mainly about late and incorrect
Zenith seems to have corrected these problems and the trustees of the funds have made a
decision to stick with Zenith" Mr. Esposito said.
The previous administration of the funds. Mr. Esposito said, had been inefficient and
expensive. Since the Zenith takeover, costs have been cut by about $15 million a year
through the elimination of unnecessary jobs and through improved computerization, Mr.
In April. the United States Attorneys office in the Southern District of New York State
subpoenaed the district councils documents concerning negotiations with Zenith and other
companies that sought the contract.
Spokesmen for the United States Attorneys office and the Labor Department would not
comment on the inquiry.
Since Zenith took over. the members have suffered and we Cant get any answers as to what
is going on said Gene Clark, a former district council official who asked the Labor
Department to investigate. Many of us think the contract was handed to Zenith without
truly competitive bidding because of the companies relationship with McCarron.