Lawyers Guns and Money
Police and Fire Unions Spend $1.8 Million on Lawyers and Negotiations
VPOA has $524,200 War Chest while IAFF Owes $163,215
By Paul (The Gadfather) Norberg, retired CFO & Katy (ADQ) Miessner
10/6/11
We recently reviewed the IRS Form 990 for the Vallejo Police Officers Association and the IAFF Local 1186 Firefighters. Both of these organizations are exempt from federal taxes as labor organizations under IRS code section 501c5. As they are exempt from taxes their financial records are open to public inspection much like a charitable organization.
The table below summarizes some of the major items of revenue and expense for the last four years.
IAFF takes a big hit for Kurt Henke and New Contract Negotiation
On 09/30/2010 after substantial and mounting legal expenses totaling more than $1.1 million, the IAFF found itself in the red, with a net loss of $125,641 and owing $163,215 they had to borrow. The IAFF agreed to pay, and were responsible for legal costs incurred in the “Defamation of Character” lawsuit brought by their former President (and former Vallejo Assistant Fire Chief) Kurt Henke against current and former Vallejo city employees and council members. In addition they had to deal with Vallejo‘s bankruptcy and negotiate a new contract. The Henke lawsuit moved through the legal system with Henke losing in the lower courts and on appeal as well. The courts did not agree with Henke’s position: they considered the defendants merely exercising their right to free speech and required Henke and the IAFF to pay legal expenses for the City of Vallejo and for Otto Giuliani. . Information received by VIB indicates that Davis apparently overstated the merits of the case with the resulting devastating impact on IAFF finances.
Former Interim City Manager Otto Giuliani, a defendant in Henke’s suit, then sued Henke, Henke’s lawyer Alan Davis and the IAFF for Malicious Prosecution. In Giuliani’s lawsuit against Henke, Henke settled just before the Superior Court ruled on Giuliani’s suit. The details of that settlement are sealed by a confidentiality agreement.
The IAFF also appealed Vallejo’s bankruptcy filing and incurred additional legal costs. They eventually settled on a new contract and accepted a number of concessions to help balance Vallejo’s budget. As IAFF represents not only Vallejo, but also American Canyon, Benicia, Cordelia, Fairfield and Rio Vista, some of their costs are associated with these cities. The new IAFF Board of Directors is controlled by members outside Vallejo and appears not to be involved in Vallejo political issues. All the members of IAFF took a hit for Henke’s arrogance.
VPOA Accumulates $524,200 War Chest and will soon have another $1 million to further its Goals
If IAFF had not chosen to fund Kurt Henke’s lawsuits, their bottom line would likely be as healthy as VPOA’s currently is, who ended their fiscal year 2010 with half a million dollars in the bank. When VPOA settled their bankruptcy claims, the Vallejo City Council majority (Davis, Hannigan, Sunga, Wilson and Bartee) agreed to pay them $1,000,000 in a settlement of their objections to the bankruptcy filing ($333,333 per year starting 7/1/12). By settling early the VPOA avoided the legal costs in fighting the bankruptcy filing and also avoided all the costly give backs in salary and benefits that the other unions ultimately accepted. In 2010 the VPOA spent $128,610 on “Public Relations Community Events”. Although the detail is not in the report we believe that a significant portion of this expense was for the “In Your City” publication which urged a No vote on Measure A removing Binding Arbitration from the city charter. To the extent that VPOA uses their regular IRS Code Section 501c5 organization for political purposes there is a potential violation of the California Fair Political Practices Commission rules and regulations. As of 12/31/2010, the VPOA had $524,200 in the bank and will soon have another $1 million. This will likely fund a number of “In Your City” publications supporting their political agenda in the future. The City Council created a potent political force when they decided to settle with VPOA and pay them $1 million for their bankruptcy claims.
Summary of Revenue and Expense for VPOA and IAFF
-
VPOA Four Years Ending 12/31/10
IAFF Four Years Ending 9/30/10
Revenue
Member Dues
1,296,128
1,940,140
Other contributions
239,398
110,089
Insurance refund
65,727
Miscellaneous
9,387
133,891
Total Revenue
1,544,913
2,249,847
Expenses
Salaries and benefits
58,818
331,504
Insurance
282,783
202,549
Negotiations
616,010
Legal
27,204
1,130,636
Bankruptcy
32,219
Public Relations Community events
128,610
45,051
Dues to other organizations
43,581
183,551
Accounting
85,463
Conferences
19,164
72,900
Other costs
160,570
395,187
Total Expenses
1,368,959
2,446,841
Revenue less expenses
175,954
-196,994
Cash balance
524,200
32,709
Secured Mortgages and Notes Payable
0
-163,215
Fund Balance
557,959
-125,641
The 2010 Form 990 for the VPOA is available HERE and the IAFF form is HERE Historical forms are available on the Foundation Center web site (EIN 237253351 for VPOA and EIN 946117577 for IAFF) http://dynamodata.fdncenter.org/990s/990search/esearch.php. A summary of the VPOA Form 990 for the four years is available HERE and for the IAFF HERE
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