The union local representing New York City’s public sector clerical workers was placed under  administratorship by its international union, the American Federation of State, County and Municipal Employees (AFSCME), over allegations of financial mismanagement, THE CITY has learned.

Local 1549 of District Council 37 announced the local’s day-to-day operations are under the control of the international union “effective immediately” following an audit that revealed “serious deficiencies and numerous violations of AFSCME’s Financial Standards Code,” according to a letter addressed to rank-and-file members dated Sept. 19. 

A draft version of the audit obtained by THE CITY revealed questionable payments to a former employee of the local working as a consultant, gift cards given to union staffers not properly tracked, and $45,500 in car service expenses by ousted Local 1549 President Eddie Rodriguez that never should have been covered by the union. 

Also flagged: $257,000 in American Express charges, where “in many instances, the union business purpose of the charges was not explained.” Auditors stated: “Local 1549’s practices here are very concerning.”

The audit spanned the period of time from January 2020 to April 2022. Henry Garrido, executive director of DC 37, said that union members submitted the complaint that triggered the audit directly to AFSCME.

The administratorship is the latest financial scandal at Local 1549, whose members are among the city’s lowest-paid workers. In 2001, Al Diop, the former president of the now 12,000-member local, was sentenced to up to four years in prison for rigging a union election and ripping off union funds. 

DC 37, the city’s largest public-sector union, is gearing up for negotiations with the Adams administration for a new contract covering approximately 100,000 workers. Bargaining is set to begin in the coming months — even as the city faces massive budget deficits. The unions are meanwhile trying to make a rocky transition to a new privatized Medicare plan with the aim of saving money.

DC 37 city workers rally in Foley Square for better pay, June 15, 2022. Credit: William Alatriste/NYC Council Media Unit

“We’re committed to getting the best contract possible to our members, and we’re concentrating on dealing with a difficult issue with health care,” Garrido said in an interview with THE CITY on Wednesday. “So, to me, while we can maintain a zero tolerance policy for any kind of misbehavior or anything like that, our focus is to provide services to our members. This is not going to be a distraction or anything for what we need to do to get and deliver for our members in the best way possible.”

‘Emergency Situation’

AFSCME spokesperson Tracey Conaty confirmed the contents of the letter, adding that the matter is pending an internal judicial panel hearing by the international union next month. She declined to comment further.

“In my opinion an emergency situation exists in Clerical Administrative Employees, New York, New York Local 1549, AFSCME, AFL-CIO, in that dissipation or loss of the funds or assets of the local is threatened and the local is acting in violation of the International Constitution,” AFSCME president Lee Saunders wrote in a Sep. 19 suspension notice to the union’s officers cited in the communique to rank-and-file members. “Therefore, in accordance with Article IX, Section 37 of the International Constitution, I am placing AFSCME Local 1549 under administratorship, pending notice and hearing, effective immediately.”

Rodriguez and the rest of Local 1549’s top leadership were immediately removed. The local — with 12 full time employees — is now being run by James Howell, AFCME’s eastern regional director, who earned $271,093 in 2019. 

Rodriguez declined to comment. “I don’t want to talk about it,” he told THE CITY before hanging up. 

DC37 Local 1549 President Eddie Rodriguez Credit: DC37

His supporters contend the audit’s findings described financial practices that go on at many of DC 37’s other 56 locals. They also contend the AFSCME takeover is politically motivated. 

In January 2019, Rodriguez, who had served as DC 37’s president since the early 2000s, was defeated by Shaun D. Francois I, president of Local 372. That’s the largest local in DC 37, representing more than 23,000 school staff including school crossing guards and school lunch workers. 

School crossing guards earn $15.45 an hour and an average of $19,500 annually, according to Intuit, which calculated the data based on 133 TurboTax users. School lunch helpers earn $33,944 a year, according to ZipRecruiter

Garrido runs the overall union operation with an executive board, while the DC 37 president has a lesser role — presiding over meetings of the union delegates, presidents, and executive board. 

“I think it’s political because the problems that they noted go on in most of the locals,” said Arthur Schwartz, an attorney who has represented many members who have opposed DC 37’s leaders. 

“I have no idea what he’s talking about,” Garrido told THE CITY in response.

“This behavior does not happen in the other locals,” he added. “That is patently false.”

A group of people who challenged Francois’ reelection as head of Local 372 last year alleged that he received $296,015 in improper overtime payments in addition to his salary, according to The Chief-Leader. Overtime has long been prohibited for local presidents at DC 37. 

Francois did not immediately respond to a request for comment. 

Schwartz, who is representing Francois’ opposition, noted the local’s treasury has gone down on average by about a million dollars a year since 2015. Francois has asked AFSCME to audit the local’s finances. 

Unverified Pay

As for the Local 1549 audit, the 10-page assessment was based on a “review of policies, minutes, financial statements, and a sample testing of the Local’s accounting records.”

The review first took issue with pay given to Ralph Palladino, the second vice president of the local, who retired in December 2021. All told, he was given $170,470 to cover 71 unused vacation days, 43 compensatory days and 14.3 years of severance pay. Other DC 37 locals have similar packages including so-called severance pay for when officers retire, according to labor insiders. 

The audit questioned Palladino’s stockpiled comp time and noted there was no proof the union’s executive board approved the overall “cash outs” for him. 

“We have been presented no evidence that the full-time officers punch in and out of work at the time clock or have a set number of hours per day or week that they work,” the audit said. “We cannot verify that the compensatory time accrued and paid was properly documented and paid or even the basis for the claim that compensatory time should be granted for work performed.”

The local’s leaders should also create a “clearly defined policy” for retirement payments, the audit added. “The Local should consider whether continuing these large separation payments upon retirement of its officers is in the best interest of the membership,” the financial review said.  

Palladino, who for years served as the one of the local’s loudest cheerleaders and activists, said he was not familiar with the audit and declined to comment. 

The audit also revealed that the local used Executive Charge Inc., a black car service, to provide rides for officers and staffers. 

All told, the union spent $51,301 with $45,500 going toward Rodriguez’s car service usage from January 2020 through April 2022, according to the audit. Rodriguez was driven around 109 times to commute from home to the office or vice versa, the review said.  

“This averages to be $288 for each trip for commuting,” the audit said. “Commuting is a personal expenditure and should not be paid for or reimbursed by the Local unless it is reported as…taxable wages.” 

Rodriguez did not report the usage as taxable compensation and it was not included on his annual W-2’s, the review noted. “This is a serious deficiency,” the audit said, noting that there were “multiple” times where the union was hit with additional car service “wait time” for Rodriguez ranging from $42 to $168. 

The audit also found that the union was using Dan Persons, a former employee of the union, as a consultant. He was paid $2,000 a month for a yearly total of $24,000. As part of that deal, he provided monthly invoices detailing the work performed. “But our review of invoices indicates that he copies the same work performed on several monthly invoices,” the audit said. 

Renee Gainer, a former division director at DC 37, was also paid $2,000 a month as a consultant for the local, according to the financial review. There was no formal consulting agreement and her invoices also indicate “that she also copies the same work performed on several monthly invoices,” the audit said. 

One labor expert said the local takeover by the international union was significant. 

“It is a serious thing,” said Joshua Freeman, a labor historian and author of the book, “Working Class New York.” 

“It’s an indication that the local can’t fix its own problems, and that you really have to bring in new leadership and an outside team to try to get things back on track, financially, democratically, whatever it might be,” he added. “So it’s kind of a big deal.”

Saunders, AFSCME’s current international president, was the administrator of the 2001 DC 37 trusteeship. He was put in charge after the vote rigging scandal rocked the union during the administration of former Mayor Rudolph Giuliani.