Auditor: No Problem

Guild Dissident Hits Accounting Delay

By HOWARD MEGDAL and RICHARD STEIER

SALVATORE J. ARMAO: Nearly up to date.

The auditor who played a key role in uncovering the theft of $2.4 million from the Civil Service Technical Guild last week is being criticized by a union dissident for failing to furnish forensic audits for the past three years.

The auditor, Salvatore J. Armao, responded that "everything is in order" and that forensic audits were not necessary because the longtime Tech Guild bookkeeper responsible for the embezzlement had already confessed. The drafts of regular audits covering 2002 through 2004 have been completed, he said, and a 2005 check of the union's finances will be finished within a week.

Wants Money's Worth

But Mitchell Feder, the Tech Guild's Housing Authority chapter chair, complained that, "We have paid $210,000 for what seems to amount to two IRS reports," referring to Mr. Armao's audits covering 2001 and 2002. He said he had yet to see the 2004 draft audit.

Tech Guild President Claude Fort in mid-2002 decided to replace the union's longtime auditor, Helga Kelm, as a routine matter, but the choice of a replacement became embroiled in controversy within the contentious organization, which is Local 375 of District Council 37. Mr. Armao was finally given the job in May 2003.

MITCHELL FEDER: Wants to see audits.

The following month, he asked Mr. Clarke to furnish him with all the union's financial records and bank statements for the previous year after discovering some irregularities and being unable to reconcile several transfers of funds. Mr. Clarke on June 30 asked to meet with Mr. Armao at a diner, where he acknowledged having taken a $500,000 "loan" from union funds. A further investigation, which came to involve the Manhattan District Attorney's Office, showed that $2.4 million was missing - $600,000 from the Tech Guild treasury, $1.8 million from its legal services fund.

Guild Officials Napping

Both the Tech Guild treasurer, Bob Mariano, and the legal fund's administrator, Ira Pearlstein, said they had not checked the union's books because they trusted Mr. Clarke, who had been employed there since the early 1980s.

Mr. Clarke was subsequently sent to prison; Mr. Mariano and Mr. Pearlstein were removed from their posts in response to their dereliction of duty. Mr. Feder at the time the theft was uncovered accused Mr. Fort of being slow to act, but the Tech Guild president, noting that the embezzlement all took place before he took office (the fiscal maneuvering that Mr. Armao questioned constituted attempts by Mr. Clarke to continue covering his tracks), said he had taken appropriate action and deserved credit for rooting out the wrongdoing and referring the matter for criminal prosecution.

Mr. Feder said that the Tech Guild leadership had an obligation to furnish members with all of Mr. Armao's audits.

Delayed by Cover-Up

Mr. Armao said he had been somewhat delayed in completing the audits by the erasure of financial records from Tech Guild computers by Mr. Clarke on June 30, 2003, the same evening when he revealed part of his impropriety to the auditor.

"This is not a normal situation," Mr. Armao said in a Feb. 2 phone interview. "Once we finished the forensic work, then we knew what the numbers were. At that point, we had to redo 2002, then worked on 2003 and 2004."

Mr. Feder was skeptical of that explanation. "We've never gone more than a year without a report," he said. "Something's wrong here."