Organized crime Paper locals are often used as a means of
extorting money. The individual who controls a paper local may threaten to unionize an employer's workers unless he receives a payoff. In at least one case, a paper local based its extortion fee not on the number of workers an employer had but the number of coin-operated machines it had installed in local businesses. Paper locals often enter into
sweetheart contracts that are grossly unfair to workers, and then the employer and paper local
embezzle money from the business. While a legitimate union contract might cost X amount of money in wages and benefits, the sweetheart contract costs much less; the difference is split between the individual(s) who control the paper local and the company owners. In one infamous example, a paper local and an employer entered into a sweetheart contract in which workers were able to take only one holiday off each year,
Passover. Since the workers were almost all
Puerto Rican and non-
Jewish, they did not take the holiday off and the employer was not forced to pay workers for a day off. On occasion, employers have formed paper locals in order to establish
company unions, and prevent unionization of their workforce.
Union democracy and fraud Paper locals have sometimes been established by labor union leaders in efforts to fraudulently win internal elections. Perhaps the most famous example is the
establishment of the "Dio locals" in the
International Brotherhood of Teamsters in the mid-1950s.
Midwestern Teamster leader
Jimmy Hoffa wished to unseat
Dave Beck, the union's international president. In October 1956, mobster
Johnny Dio met with Hoffa in
New York City and the two men conspired to create as many as 15 paper locals to boost Hoffa's delegate totals. Four of the paper locals were dissolved to avoid committee scrutiny, several Teamster staffers were charged with contempt of Congress, union records were lost or destroyed (allegedly on purpose), and wiretaps were played in public before a national television audience in which Dio and Hoffa discussed the creation of even more paper locals. Beck appeared before the select committee for the first time on March 25, 1957, and notoriously invoked his
Fifth Amendment right against self-incrimination 117 times. The McClellan Committee turned its focus to Hoffa and other Teamsters officials, and presented testimony and evidence alleging widespread corruption in Hoffa-controlled Teamster units. The scandals uncovered by the McClellan committee, which affected not only the Teamsters but several other unions, led directly to the passage of the
Labor-Management Reporting and Disclosure Act (also known as the Landrum-Griffin Act) in 1959. The use of paper locals may still be a problem for American labor unions. The
Service Employees International Union (SEIU) has been accused of establishing paper locals (known in the union as "provisional locals") so that leaders can win election to office and dominate political opponents. ==Other uses==