Civil Service Commission Upholds Termination For Fire Union Official's Misappropriation of Funds

While the Civil Service Commission ultimately ruled that the City of Salem had just cause to terminate a fire fighter and former union President, the Commission's lengthy decision urges caution to municipal employers and unions making broad accusations about misappropriation of charitable donations. This decision, especially when coupled with a recent Superior Court decision involving a Nahant Fire Union official, demonstrate that misappropriation of union (or city) funds likely will result in termination.

Here, the Salem Firefighters Local 172 hired a CPA to review its account after an internal review raised questions about nearly a dozen transactions handled by its former President, Fire Lieutenant John O'Leary. The questions arose after O'Leary stepped down as president following contentious relations with the City. The CPA concluded that about 10 alleged recipients of Local 172 funds did not have records that confirmed Local 172 transactions. The CPA concluded that nearly $26,000 of Local 172 funds were misappropriated by O'Leary for his personal use.

Local 172 gave a copy of the report to the City, which placed O'Leary on paid administrative leave pending a hearing. The City cited the CPA report, claiming that O'Leary misappropriated funds for a personal purpose. A City hearing officer concluded that O'Leary breached his fiduciary duty to the Union, donors to the Union and intended recipients of Union funds. The City ultimately terminated O'Leary.

Leary appealed to the Civil Service Commission, which found the City's decision, and the CPA review upon which it relied, riddled with flaws. He said the CPA review was conducted by a friend of the current President (rather than an impartial accountant), was made without awareness of the internal union strife that led to the report, and was not an audit. The CPA report appeared targeted to O'Leary, rather than a comprehensive audit about all who had access to Local 172 funds. And the CPA never spoke directly to O'Leary or recipient organizations.

The Commission rejected 10 claims of misappropriation outright for insufficient proof. The Commission, however, concluded that $2,100 from about 5 transactions was misappropriated. O'Leary also admitted using Local 172 funds to travel with his wife to a Fallen Firefighters Memorial. The Commission ruled that Salem, therefore, had just cause to discipline O'Leary.

Despite rejecting about 2/3 of misappropriation charges against O'Leary, the Commission upheld termination. The Commission has limited power to reduce discipline issued by a public employer once it concludes that discipline was appropriate. One of those rare instances occurs when the Commission rejects a significant number of charges. But the nature of the charges upheld - misappropriation of donations to public safety union -- made O'Leary ineligible for this rare exception. "By his own actions, Mr. O'Leary violated that [public] trust [in public safety officers] there is no place for him in the Salem Fire Department."

The Commission's decision is a cautionary tale to any Union official who may abuse the trust placed in him or her. This decision holds that off-the-job misconduct exclusively related to union duties may justify termination. The decision also reinforces the peril faced by union officials who have incomplete or inaccurate record keeping.

Once unions have legitimate questions about appropriateness or validty of certain transactions, they are best advised to commission a thorough and objective audit from an impartial auditor or CPA. Similarly, public employers who seek to terminate employees for misappropriation of union funds should conduct their own independent review and/or ensure that any union review relied upon meets accepted standards of objectivity.