Two Former Presidents of Boilermakers International Union Among Seven Indicted for $20M Embezzlement Scheme

A federal grand jury in Kansas returned an indictment yesterday charging seven defendants, including five current and former high-level officers of the International Brotherhood of Boilermakers, Iron Ship Builders, Blacksmith, Forgers and Helpers (Boilermakers Union) for their alleged roles in a 15-year, $20 million embezzlement scheme.

The defendants are charged with conspiracy to commit offenses under the Racketeer Influenced and Corrupt Organizations (RICO) Act, as well as other charges including embezzlement, health care fraud, wire fraud, and theft in connection with health care and retirement plans.

"As alleged in the indictment, these defendants, including two former presidents of the Boilermakers Union, enriched themselves by spending millions of dollars in union funds for their own benefit, including for salary and benefits for no-show jobs, tuition, rent, luxury international travel, meals, vacation payouts, and unauthorized loans," said Principal Deputy Assistant Attorney General Nicole M. Argentieri, head of the Justice Department's Criminal Division. "This indictment marks an important step in restoring financial security to the Boilermakers Union and control of the union's future to its membership. The department is committed to protecting union members from officials who abuse their positions of authority for their own personal ends."

The defendants are former union president Newton Jones, 71, of Chapel Hill, North Carolina; former secretary-treasurer William Creeden, 76, of Kearney, Missouri; former president Truman "Warren" Fairley, 59, of Chapel Hill; current secretary-treasurer Kathy Stapp, 53, of Shawnee, Kansas; former vice president Lawrence McManamon, 76, of Rocky River, Ohio; Kateryna Jones, 32, of Chapel Hill; and Cullen Jones 35, of Chapel Hill.

"Union members pay their dues believing union leaders will use the money in support of the organization's mission to advocate for and protect employment rights," said U.S. Attorney Kate E. Brubacher for the District of Kansas. "The Department of Justice is deeply concerned whenever there are accusations of fraud and misappropriation of union funds."

"The employees believed the Union executives would promote and protect their best interests. Instead, they allegedly utilized their positions for personal and financial gain," said Special Agent in Charge Stephen A. Cyrus of the FBI Kansas City Field Office. "By allegedly unlawfully misappropriating Union funds, the defendants betrayed their members' trust and confidence. Anyone who unlawfully profits at the expense of others will be held accountable."

"We would like to thank our fellow law enforcement partners, the Criminal Division, and the United States Attorney's Office for working collaboratively to bring change within the Boilermakers International Union," said District Director Christiane Abendroth of the Department of Labor's Office of Labor-Management Standards (OLMS). "Today's indictment of seven defendants, including five current and former high-level officers, is a direct result of OLMS's audit findings and a multi-agency criminal investigation. We look forward to obtaining justice for the rank-and-file union members by removing officers who allegedly treated the union as their personal piggy bank."

Over the course of 15 years, the defendants, led by Newton Jones and William Creeden, allegedly engaged in widespread embezzlement of the funds of the Boilermakers Union including:

• Over $5 million in unnecessary luxury international travel;
• Over $2 million in salary and benefits to Kateryna Jones and Cullen Jones for no-show jobs, at which they were not required to work, including payment of two years of salary to Kateryna Jones for a period when she resided in Ukraine and was dating Newton Jones;
• Hundreds of thousands of dollars in tuition, rent, and relocation expenses for members of the family of Newton Jones;
• Millions of dollars in cash payments relating to fraudulently claimed vacation time;
• Hundreds of fraudulent restaurant charges by Newton Jones and Kateryna Jones in their hometown;
• Funds wrongly expended to engage in email surveillance of Union employees to defend Newton Jones and McManamon from internal union charges; and
• $7 million in loans from the Boilermakers Union MORE Fund executed by Newton Jones and Creeden to the Bank of Labor, which were not authorized under the terms of the Boilermakers Union constitution or its conflict-of-interest policy.

The indictment also charges Newton Jones and Creeden with wire fraud relating to their alleged demand and acceptance of no-show employment with the Bank of Labor for which they were paid more than $3.4 million each in salary, benefit contributions, and other paid benefits. The indictment additionally seeks forfeiture of $20 million.

If convicted, the defendants face a maximum penalty of 20 years in prison on the RICO conspiracy count. A federal district court judge will determine any sentence after considering the U.S. Sentencing Guidelines and other statutory factors.

The FBI Kansas City Field Office and the Department of Labor are investigating the case.

Trial Attorney Vincent Falvo of the Criminal Division's Violent Crime and Racketeering Section and Assistant U.S. Attorneys Faiza Alhambra and Jabari Wamble for the District of Kansas are prosecuting the case.

An indictment is merely an allegation. All defendants are presumed innocent until proven guilty beyond a reasonable doubt in a court of law.

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