The Haunted Houses of Labour
If the mainstream labour movement has any haunted houses, they must surely be the real estate interests of some of its biz unions and the tangled spider's web of relationships among union officials, corporate executives, pension plan administrators and businessmen that these have spawned. The following story should, in our opinion, scare the hell out of anyone who is concerned about the community of workers. A word of warning: This is one long and convoluted tale and - out of concern for your health - we're only giving you the short version. Our intention is to use this story as a basis for discussion about the questions it raises - questions the Power Source need to consider and put to those who claim to represent its interests.
Hotels are one segment of the service industry with a long history of unionization and a relatively high proportion of organized workers. The unionized workforce within the Canadian accommodation industry is about 20% (compared to 8% for the entire service sector). Until the early 1990's, the Hotel Employees, Restaurant Employees Union was the largest of four unions that represented the majority of workers in the industry. The others were the CBRTGW, the USWA and the Federation du Commerce. The UFCW wasn't even on the map. It was around that same time that the UFCW decided that it was time to change all that - it wanted a piece of the action. Rather than organizing workers at non-union hotels, however, the UFCW found another way in which to penetrate this market.
A Really Wicked Strategy
Starting in the early 1990's the UFCW began investing funds from its Canadian Commercial Workers Industry Pension Plan (the CCWIPP - a jointly trusteed multi-employer plan), in financially troubled hotels. Over the next ten years, senior officials of the UFCW and CCWIPP Trustees facilitated the investment of millions of dollars from the pension fund to a number of hotel businesses in which either UFCW officials or CCWIPP Trustees had an interest.
In some cases, one of which we will explore in some depth, the UFCW obtained voluntary recognition from the hotel companies, obtaining from the businesses in which it had invested heavily, a stream of new members. The CCWIPP also invested heavily - it is a majority shareholder in fact - in a hotel management company that is responsible for the day-to-day operation and labour relations of various hotels. In some cases, workers at these hotels are represented by the UFCW.
The way the investment strategy worked was that funds from the pension plan were invested in the hotel businesses through a series of corporations called I.F. Propco. Currently there are 53 I.F. Propco's registered in Ontario alone. Three names appear with regularity among the Officers of these I.F. Propco companies: Clifford Evans (former UFCW National Director and current Chairman of the CCWIPP Investment Committee), Howard Preston (an employer Trustee on the CCWIPP Board of Directors) and Eugene Fraser. The earliest records of incorporation of "Propco" companies date back to the late 1980's when I.F. Propco's 1 and 2 were incorporated in British Columbia. Their principals included Cliff Evans (at that time UFCW Canadian Director), Victor Pinchin (an Executive with Safeway Corporation), Bernard Christophe (President of UFCW Local 832 in Manitoba and a union Trustee on the CCWIPP Board) and Howard Preston (an employer Trustee on the CCWIPP Board). The purpose that these early Propco's served is unknown. Presumably they were vehicles for the investment of funds from the pension plan. Certainly, Propco's that were set up a few years later were used for that purpose.
The concept of investing pension funds in business ventures was part of an overall strategy discussed by UFCW's Canadian Director, Tom Kukovica, in a 1993 interview with labour-oriented magazine, Our Times.
Besides putting money directly back into the pockets of the membership, the joint trusteeship of pension plans between the UFCW and its various employers has permitted the union to control the investment destiny of millions of dollars. "With the pension funds we've been mainly concentrating in real estate, such as affordable housing projects," says Kukovica. This month the UFCW, with an equity stake of over 50 per cent, helped to re-open the Triumph Hotel in suburban Toronto, "It was in receivership. Now the hotel will be unionized, so we've created (union) jobs at the same time.
A Triumph of Biz Unionism
The union's hotel investment strategy first came into the public eye in 1992, when a Toronto hotel known as The Skyline Triumph went into receivership and closed in the summer of 1991. A company called Kelloryn, a business registered to a Toronto area entrepreneur named Ronald Kelly, purchased the Triumph several months later. Kelloryn's acquisition of the hotel was assisted by $15 million in financing obtained from the CCWIPP. Loans of $7 million and $8 million were facilitated through I.F. Propco 14 and I. F. Propco 16 respectively, in 1992 and 1993. Propco 16's registered address was at the offices of Ahee, McMahon and Meikle, a law firm connected with the CCWIPP. Among the Directors of both Propco 14 and Propco 16 were Alexander Ahee, a partner in Ahee McMahon, Clifford Evans, Howard Preston, Bernard Christophe and Victor Pinchin. These men, all of whom had a connection with the CCWIPP, were involved in facilitating the movement of millions of dollars from the pension plan to businesses in which some of them also had a stake.
In the fall of 1992, just prior to the re-opening of the hotel, Ahee, Evans and Preston became officers of Kelloryn along with Edward McConnell (an investment manager with a firm used by the CCWIPP, former business partner of Ron Kelly), Ronald Kelly himself and Hubert Kelly (Ron's brother). So, a number of CCWIPP trustees were now officers of a business that would benefit from the investment of CCWIPP monies. They also controlled the I.F. Propco companies that would facilitate the investment of those monies.
Prior to opening for business, Kelloryn entered into a franchise arrangement with the Howard Johnson's chain through a company called Accommodex Franchise Management - a hotel management company that holds the Canadian franchise rights for a number of hotel chains including Howard Johnson's and Ramada Inns. Kelloryn also retained Accommodex to manage the operation of the hotel. Accommodex appears to be a division of a company called AFM Hospitality Corporation. At some point during the 1990's AFM became a recipient of considerable CCWIPP assistance - the web site of AFM Hospitality www.afmcorp.com (www.afmcorp.com) tells us that the UFCW pension plan is one of its majority shareholders. So, a company that provided management services to hotels, was funded in a big way by a union that represented hotel workers.
Managing the day-to-day operation of the hotel included, among other things, managing its personnel and labour relations functions. This excerpt from an OLRB that explored the UFCW-CCWIPP-Kelloryn relationship in some depth gives an indication of the scope of AFM's management responsibilities in this area:
"Accommodex retains complete control and discretion in the management of the operation in all its aspects - including labour relations. Accommodex is responsible for the selection, employment, termination or employment, supervision, direction, training and assigning of the duties of all employees, and may enroll those employees in pension plans, benefits arrangement (including multi-employer plans) as it considers appropriate. Accommodex conducts all labour relations activities, including grievance and arbitration proceedings, and collective bargaining negotiations."
The company that was built in large measure on union members' pension funds was in the business of representing employers in labour relations matters. It made decisions as to who would be hired, fired, trained, and enrolled in multi-employer pension plans. It would represent management in grievances and at negotiations. By 1995, Wayne Hanley, currently President of UFCW Local 175 became a Director of AFM Hospitality Corporation, a position he continues to hold.
As the grand re-opening day for the Toronto hotel, to be called the Howard Johnson Plaza, drew near in the fall of 1992, more than four thousand desperate job seekers lined up to apply for 150 jobs paying between $8.00 and $15.00 per hour. But the desperate were not the only people who were enthusiastic about the grand re-opening. A week or so before the reopening, Kelloryn Hotels Inc. entered into a collective agreement with UFCW Local 206. Among Kelloryn Hotels Inc.'s officers was Cliff Evans who, although by this time retired from his position as UFCW Canadian Director, continued on as a Vice President position with UFCW International and continued to sit on the Board of the CCWIPP. The hotel's newly-hired workforce were required to join UFCW Local 206 as a condition of employment and were advised by management that the UFCW had a financial stake in the hotel.
UFCW Local 206's newly acquired bargaining rights came as a surprise to Hotel Employees, Restaurant Employees (HERE) Local 75. The HERE local had represented workers at the hotel since 1981. All of those workers had been permanently laid off when the Skyline Triumph closed. HERE appears to have been kept in the dark about the new owners' plans and about the involvement of the UFCW in those plans. Upon getting wise, HERE filed an application for successor rights with the Ontario Labour Relations Board. In 1993, the OLRB granted Local 75's application on the basis that the business had not substantially changed from the one operated by the former owners. The UFCW lost its bid for representation of the workers at the hotel in which it had a large financial stake. This setback, however, did not dampen the UFCW's enthusiasm for this hotel and others.
A very similar series of events unfolded in Ottawa in 1993. Once again, Kelloryn purchased a bankrupt hotel, financing was provided by the CCWIPP and a collective agreement signed between Kelloryn and UFCW Local 206 in advance of the hotel's re-opening. The newly hired workers were, as a condition of employment, required to join Local 206. As had been the case happened Toronto, an application for successor rights was filed by Ottawa-based HERE Local 261, which had held bargaining rights at the hotel for a number of years. Local 261, however, never had its day in court. It agreed to a two-way representation vote with UFCW Local 206, and lost.
Kelloryn rolled right along purchasing another seven hotels over the next couple of years. Although a public record of the financing of these hotels is not available, it is known that during this period a number of new Propco's were incorporated. Both the Propco's and corporations that owned the newly acquired Kelloryn hotels had among their officers, former UFCW National Director Cliff Evans. Assuming that the relationship between the hotels, the Propco's and the CCWIPP was the same as the one documented so well in the case of the Toronto hotel, we can assume that millions of dollars continued to flow from the CCWIPP to various hotel businesses in which Evans had a stake during this time.
The Strange Story of HERE Local 75
Not long after it won successor rights for the Howard Johnson Plaza in Toronto, something very unusual happened at HERE Local 75. The local's executive attempted to break away from HERE International and go independent. In order to fully appreciate the strangeness of this move, it's important to understand a bit of the background and history of HERE Local 75.
With some 6,200 members, Local 75 was the largest hotel union in Ontario and one of HERE's largest Canadian locals. The majority of its members worked in the hospitality and food service industry - most in hotels. Local 75's growth was due in large part to a series of mergers of smaller HERE locals that had occurred during the 1980's. These mergers were believed to have been sanctioned by the International and involved some effort on the part of Local 75's President, Jean Guy Belanger. Belanger was believed, in some quarters, to have been handpicked for the local presidency by the union's Canadian President, James (Jimmy) Stamos.
The flamboyant Belanger was well known and not very well respected in local labour circles. His flamboyance and fondness for expensive suits and gold jewelry were among a number of things that made local labour officials cringe. His efforts at merging a number of smaller HERE locals had drawn criticism from other HERE Local officials. Mainstream labour leaders went so far as to publicly criticize the local for its shabby track record and undemocratic practices. There were intimations of connections between the Belanger and organized crime figures. More ominously, according to a decision of the OLRB released in the summer of 1994, "differences had arisen between the officials of Local 75 and the officials of the Parent Union (HERE International). The controversy involves the administration of local 75 the way in which Local 75 has been managing its affairs and the whereabouts of some $400,000 said to be owing to the Parent Union".
Whatever the reasons for the rift, at a general membership meeting held on July 12, 1994, local 75 officials attempted to disaffiliate from the International. The International constitution allowed for disaffiliation, except where 3 or more members objected. Fortunately, there were not many members present at the meeting where the disaffiliation resolution was presented. Few of the Local's 6200 members attended the GMM and that was not surprising. The notice of the general membership meeting indicated only that "union business" was going to be discussed and made no mention of anything special that might be on the agenda. The 57 members who attended the meeting were nonetheless, asked to vote on a motion to disaffiliate from the international, which they did, and then to approve a motion authorizing the opening of a new bank account which they also did. The whole thing was over in a matter of minutes.
The following day, Belanger advised HERE International of the disaffiliation and the International promptly placed Local 75 in trusteeship. Belanger boldly resisted the International's efforts at taking control of the local, denying HERE officials access to the local's offices and refusing to turn over documents and records. Ultimately, the trusteeship would become the subject of considerable litigation, which in the end, Belanger and his followers (a group of former Local 75 officials) would lose. Belanger certainly seemed intent upon taking the Local independent. During the course of those proceedings it would be alleged by another HERE official that one of Belanger's followers, Jerry Jones, intimated that the group had "five million dollars at its disposal to finance the new operation". In August 1994, the OLRB dismissed Belanger's application for an interim order directing employers to remit dues to the disaffiliated Local 75. Eventually, he would be unsuccessful in other litigation he initiated.
Despite HERE's winning successor rights for the Howard Johnson Plaza, UFCW Local 206 representatives continued their contact with the hotel workers. In 1994 Local 206 filed a displacement application for certification. During the course of hearings into the petition the OLRB subjected the UFCW-CCWIPP-Propco-Kelloryn relationship to considerable scrutiny. Concluding that the UFCW's significant stake in the business and the "special treatment" accorded its representatives (Frank Kelly and John Hurley, currently President and VP of Local 206) by management were enough to cast the voluntary nature of the petition in doubt; the Board dismissed the decertification application. The UFCW had lost its second bid to acquire representation rights at the hotel.
While the UFCW was fighting with the trusteed Local 75 over its attempts to get certified at the Howard Johnson Plaza, Jean Guy Belanger and his followers were busy as well. Local sources indicate that by 1995 Belanger and his followers had started their own independent union which attempted to raid existing Local 75 hotels as their collective agreements came up for renewal, including a multi-employer master contract that covered approximately a dozen large Toronto hotels. For some period of time, the Belanger group occupied space at 61 International Blvd. in Toronto - the UFCW national office. Their attempts at raiding did not produce results and the group appears to have disbanded sometime in 1995-96. Belanger is reported to have returned to Montreal to work for a local supermarket. At least two of his supporters were hired on business reps by the UFCW - one of them, Jerry Jones, currently works as a business rep with Local 206. Now, we are not saying that the UFCW was involved somehow in Local 75's attempt to part company with HERE International. We are not even suggesting that the UFCW was supporting the efforts of the former Local 75 officials to raid the HERE hotels. All that we're saying is that there were some very unusual things going on indeed.
Meanwhile back at the AFM Corp
At some point, Kelloryn became a business unit of AFM, looking after the hotel ownership side of the business. AFM's 1997 Annual Report describes Kelloryn Holdings Inc. as a subsidiary responsible for hotel purchases. Presumably, when AFM acquired Kelloryn, it also acquired Kelloryn's various hotels. By 1997, according to its annual report, AFM was busy selling them off. This excerpt from AFM's 1997 Annual Report describes the scope of its business:
The company's business activity is organized into 4 units; hotel franchising, hotel management, hotel ownership and hotel purchasing services. The hotel franchising is conducted by two subsidiaries; Accomodex Franchise Management Inc., (Accomodex), which holds the master franchise rights for Canada of the Howard Johnson and Villager Lodges brands, and Ramada Franchise Canada Inc. (RFCI), which holds the Canadian Franchise rights for the Ramada brand. Hotel management services are provided by Accomodex; the hotel ownership is through Kelloryn Holdings Inc. (Kelloryn) which in turn has seven subsidiaries which formerly owned the seven individual hotels; the purchasing company services, HFS Purchasing Services - Canada, are provided by Accomodex and operates under a franchise license from Cendant Corporation (formerly HFS Inc.).
Despite the scope of its operations, AFM's financial performance appears to have been less than impressive during the mid and late 1990's. In 1996 and 1997 it posted losses in excess of $5 million dollars in each year. More recently, in October 2000 it was the recipient of more assistance from the CCWIPP. In exchange for some 800,000 shares, the CCWIPP appears to have swallowed some $2 million dollars worth of AFM's debt in a debt conversion scheme that allowed AFM to convert $2 million worth of debt to $2 million of equity. We do not pretend to be experts in analyzing corporate financial performance. This link will take you to information about AFM's financial performance and that of some of its industry competitors. Come to your own conclusions.
A list of UFCW-represented hotels can be found at the end of this article. We note that a number of these are part of the AFM family. In the case of those hotels it would seem that the UFCW represents the workers, AFM represents management and the UFCW pension plan supports the company that represents management.
The Textile Processors and other unraveling mysteries
Ultimately the Toronto Howard Johnson Plaza and a number of other hotels were acquired by the UFCW. In 1996 HERE's bargaining unit at the hotel was successfully "raided" by the Textile Processors union. The Textile Processors Union merged with the UFCW later that year bringing with it a sizable number of hotels in addition to its laundry industry members.
In the wake of the UFCW's merger with the Textile Processors, a few other property transactions have come to light. At the time of the UFCW-Textile Processors merger, Ralph Ortlieb, a UFCW International Rep and Textile Processors Canadian leader, Tommy Corrigan, were Directors of a company called LHWF Holdings. LHWF sold the Textile Processors office building at 34 Madison Avenue in Toronto to John Evans, son of Cliff Evans for a price that looks like a bargain to anyone familiar with the Toronto real estate market. Ortlieb went on to become the President of UFCW Local 351 - the UFCW incarnation of Textile Processors Local 351. UFCW Local 351 is now based at 412 Rennie Street in Hamilton, Ontario. The building is connected to RHK Capital Inc.; a company registered to Ron Kelly, of the Kelloryn businesses. Occupying 412 Rennie are also some Teamsters offices.
The spiders' web is large and tangled.
We'll leave off here for the moment. This story is still evolving as is our understanding of it and we'll be back to you with more scary details in a future report. What we have presented so far, however, raises some very critical questions - ones that need to be discussed openly and constructively. These questions cover a range of different issues from the prudence of the kind of investing that's taking place to the relationships that are evolving between union leaders and the entrepreneurs looking for new sources of capital to relationships between unions themselves. The key question, in our minds at any rate is: Whose interests are being served?
Let's start the discussion....
Sources for this article:
- AFM Hospitality Corporation Approves Debt Conversion and Extension, AFM Press Release, October 30, 2000
- AFM Hospitality Corporation
- AFM Hospitality Corporation, Annual Report, 1997
- Canadian Commercial Workers Industry Pension Plan
- Desperate' thousands wait in cold for 150 jobs, Toronto Star, November 7, 1992
- Food Union Acted Improperly, Toronto Star, June 9, 1994
- Hotel Employees, Restaurant Employees Union, Local 75 v. Westbury Hotel v. Hotel Employees, Restaurant Employees International Union OLRB 1406-94-M, August 5, 1994
- Hotel Employees Restaurant Employees Union, Local 75 v. Accomodex Franchise Management, Kelloryn Hotel Inc., OLRB 2424-92-R, April 20,1993
- Human Resources Development Canada (HRDC)
- Introducing Tom Kukovica, Our Times, December 1992
- Labor Dumps on Belanger's Union, Toronto Star, June 18, 1989
- Michael McDougal v. Hotel Employees Restaurant Employees Union, Local 75, Ontario Labour Relations Board, March 25, 1994, 2239-93-R
- Mob's Casino Interests Run Deep, Toronto Star, July 6, 1993
- Mobster's hotel tab paid by union, Toronto Star, December 31, 1989
- Ontario Ministry of Consumer and Commercial Relations records.
- Ontario Ministry of Labour
- Opportunity Knocks, MFD Articles, Scott McPherson (ed.)
- Statistics Canada
- Toronto Stock Exchange
- Union Grievance, The Fifth Estate, aired November 15, 1983
- United Food and Commercial Workers Union, Local 206 v. Kelloryn Hotels (Ottawa) Inc. v. Hospitality and Services Trades Union, Local 261, OLRB 1029-93-R, 1235-93-R, 1104-93-R, July 19, 1993
- Workers' pension fund backs hotel chain employer, The Toronto Star, July 3,1993
UFCW Hotels - Ontario
- Airlane Motor Hotel, Thunder Bay
- Best Western Motor Inns, Dryden
- Best Western Continental Inn, Windsor
- Caswell Motor Inn (985899 Ontario Ltd.), Sault Ste. Marie
- Central Hotel (619750 Ontario Ltd.), Dryden
- Comfort Inn (Travelway Inn Barrie Inc.), Barrie
- Comfort Inn (824332 Ontario Ltd.), Belleville
- Comfort Inn (680247 Ontario Ltd.), Toronto Airport
- Compri Hotel (Riverside Management Ltd.), Windsor *
- Days Inn (WHRB Realty Co.), Sault Ste. Marie
- Days Inn (541907 Ontario Ltd.), Toronto Downtown
- Delta Meadowvale Resort, Mississauga
- Embassy Suites Hotel, Markham
- Four Points Hotel (Caswell Management), Sudbury
- Four Seasons Hotel (Yorkville), Toronto*
- Hallmark Hotels, Hornepayne
- Hallmark Hotels, White River
- Holiday Inn (Commonwealth Hospitality), Oshawa
- Holiday Inn (Commonwealth Hospitality), Sault Ste. Marie
- Holiday Inn Crowne Plaza, Toronto Centre *
- Howard Johnson Hotel (Machell Park Terrace Inc.), Aurora
- Howard Johnson Plaza (WHWW Hotels, Ottawa), Ottawa
- Kewadin Inn (1138806 Ontario Ltd.), Orillia
- Journey's End Hotel (824332 Ontario Ltd.), Belleville
- Journey's End Hotel (496458 Ontario Ltd.), London
- Journey's End (1386914 Ontario Ltd.), Sault Ste. Marie
- Journey's End (537670 Ontario Ltd.), Windsor (p/t only)
- Journey's Ends Properties II Inc., Windsor
- Lakeside Inn, Kenora
- Minden Manor Motor Inn, Simcoe
- Quality Inn (Altadore), Woodstock
- Rainy Lake Hotel, Fort Frances
- Ramada Inn (Chip Reit No ll Operations), Sault Ste. Marie
- Ramada Inn (Commonwealth Hospitality), Sudbury
- Ramada Inn (1392165 Ontario Ltd.), Timmins
- Red Dog Inn (988512 Ontario Ltd.), Fort Frances
- Regal Constellation Hotel, Toronto*
- Regal Constellation Hotel, Toronto (security guards)
- Sheraton Fallsview (Romzap Ltd.), Niagara Falls
- Sheraton Parkway (Captain Developments), Richmond Hill*
- Super 8 Hotel (Sudbury VI Purchaseco), Sudbury
- The Hotel (843547 Ontario Ltd.), Windsor*
- Travelodge Ingersoll (Capital Properties Ltd.), Ingersoll
- Travelodge Chartwell, North Bay
- Travelodge Suites (Major Contracting Algoma), Sault Ste. Marie
- Valhalla Inn (Valbay Hotel Ltd.), Thunder Bay
- Westin Hotel (Winvest), London
- Westin Harbourcastle, Toronto *
* Formerly with Textile Processors
Textile Processors - Ontario Hotels
Although the Textile Processors formally merged with the UFCW, MOL records show these hotels as represented by the Textile Processors Union, Local 351.
- Cambridge Suites, Etobicoke
- Chateau Laurier Hotel, Ottawa (guards)
- Howard Johnson Plaza, North York
- Quality Suites, Whitby
- Quality Suites Journey's End, Etobicoke
- Radisson Plaza Admiral Hotel, Toronto
- Town Inn, Toronto
- Travelodge Woodbine, Etobicoke
- Westin Harbourcastle, Toronto (guards)
Source: Ontario Ministry of Labour, Office of Collective Bargaining Information