Union-owned hotel at center of federal suit

Leigh Strope

Tuesday, Feb. 25, 2003 | 9:34 a.m.

WASHINGTON -- The luxury hotel in Florida where labor leaders hold an AFL-CIO executive council meeting this week is at the center of a federal lawsuit against its union owners and the pension fund used to buy and renovate it.

Approved in 1997 as a $100 million investment by officials of the plumbers and pipe fitters union, the 998-room Diplomat Resort and Spa in Hollywood, Fla., opened five years later at a cost of $800 million.

Several union officials and activists privately expressed distaste for the hotel's opulence and the message being sent to rank-and-file members and potential recruits, especially during a weak economy and with the labor movement struggling.

The 39-story structure at the edge of the Atlantic Ocean has art deco features, a full-service spa, an 18-hole golf course and a tennis center with 10 clay courts. An outdoor pool has a see-through bottom and waterfalls that flow into a 240-foot lagoon pool. The lobby features a 60-foot glass atrium.

"It's Florida. Nobody is going to stay there if it looks bad. You've got to compete," AFL-CIO spokeswoman Kathy Roeder said.

The Labor Department has sued officials in charge of the plumbers and pipe fitters' union pension fund, alleging imprudent use of the members' money. The civil suit claims that trustees moved forward on the hotel project before studies were done on feasibility, market and budget costs.

Union officials say the suit is baseless and have moved to dismiss the case.

Organized labor was criticized roundly in years past for holding the AFL-CIO's annual February executive council meetings at a luxury resort in Bal Harbour, Fla. That location was abandoned after AFL-CIO President John Sweeney was elected in 1995, and the meeting now rotates locations.

AFL-CIO spokeswoman Lane Windham said the federation would have lost close to $100,000 had the 2003 meeting not been held at the Diplomat.

In 1999, before the hotel was built, the AFL-CIO booked it for the national convention in the fall of 2001. But construction was behind schedule, and the hotel was not open, so the AFL-CIO had to move that event to Las Vegas. The contract with the Diplomat required another event to be scheduled at the hotel or the money would be lost, Windham said.

"If we didn't use that credit, union members would have lost about $100,000," she said. "So we're holding our executive council meeting there. It makes sense to do that."

The hotel opened for business under the Westin brand 18 months behind schedule, in January 2002.

"To the disappointment of those who would tear us down, the Diplomat is doing very well indeed," the union's president, Martin Maddaloni, said in a statement.

"Even during the offseason, the hotel has experienced many sold-out periods. It is quickly becoming known as the premier destination in America, especially in South Florida, and it is fulfilling its promise as the linchpin of an entire redevelopment of this once-depressed area."

The union, officially the United Association of Journeymen and Apprentices of the Plumbing, Pipefitting and Sprinkler Fitting Industry of the United States and Canada, bought the hotel in 1997 from Ullico Inc., a union-owned life insurance company itself embroiled in an insider trading scandal. Such a sale typically would violate a federal law that prohibits large portions of pension assets to be in a single investment or in a property with ties to pension trustees.

But in 1999, the Clinton administration's Labor Department granted an exemption. The Bush administration now says the old Diplomat was imploded and construction began before the exemption was granted and a feasibility study performed. It also alleges trustees failed to investigate properly the project's service providers, contain costs and monitor the work.

Maddaloni's statement noted that the lawsuit was civil, not criminal. "In the end, we will all be vindicated," he said, "and the (union) will get the recognition it deserves as the most progressive and forward-thinking union in North America."