OF CASH AND CAREY

By EDWARD BARNES

Last year, as Bill Clinton was breezing to his re-election victory, another celebrated incumbent was fighting for his job. Ron Carey, the reform leader of the Teamsters union, had become the darling of the labor movement--and the labor press--during his five-year tenure. But working Teamsters, who had seen no significant pay or benefit increases during that time, weren't so enamored. In fact, "they were ready to throw the bum out," says a former Carey aide. The challenger, James P. Hoffa, son of the notorious former Teamsters leader, was coming on strong with a multimillion-dollar war chest. To save their man, Carey aides began a desperate scramble for money. The schemes they hatched would make a mockery of the $22 million that the Federal Government had spent to clean up the union and ensure that the race would be the fairest in Teamster history.

The race may produce the most far-reaching scandals of any in labor history. Government sources told TIME that a federal grand jury in Manhattan is investigating not only Carey but also a cast of characters who had an interest in keeping his presidency alive, including two of America's most powerful labor leaders, AFL-CIO president John Sweeney and secretary-treasurer Richard Trumka. So far, three men connected to Carey--campaign manager Jere Nash, fund raiser Martin Davis and consultant Michael Ansara--have pleaded guilty to conspiracy. The three have contradicted Carey's assertion that he had no knowledge of the scheme. Carey says he is the victim of their misdeeds. According to the U.S. attorney's charge and sources familiar with the investigation, Carey's men approached several political groups, including the Democratic National Committee, offering to donate Teamster funds in return for contributions to the Carey campaign. In effect, his men were laundering Teamsters money destined for their candidate's re-election effort. Government sources told TIME that more than $1 million was funneled this way from the Teamster general treasury to benefit the Carey campaign.

At least two of the schemes used to raise money for Carey allegedly involved other top labor leaders. In one case, as Teamsters rank and file voted last October in a two-month process monitored by the Federal Government, the Carey campaign urgently needed a cash infusion for a final direct-mail push. Carey aides approached Trumka, asking the AFL-CIO "to help Ron." They were told the federation was short of cash. They suggested funneling $150,000 of Teamster money through the federation--and into Carey coffers. Trumka agreed, according to federal investigators. On Nov. 1, a Teamster check went to the AFL-CIO, which passed it on, three days later, to Citizen Action, a small liberal activist organization. On Nov. 6, Citizen Action paid $100,000 to a company handling Carey's direct-mail campaign, according to testimony from the case in which three Carey aides pleaded guilty. Sources close to the investigation say the FBI is focusing not only on Trumka, but also on his boss Sweeney, who under federation rules would have had to approve the payment. Both have already testified before the grand jury, but neither has been charged.

The grand jury is investigating another episode, according to witnesses and federal court documents reviewed by TIME, in which Sweeney, Trumka and at least one other AFL-CIO leader are said to have secretly funneled an undisclosed amount of cash to the Carey campaign through two top Carey aides, Ed Burke and Richard Blaylock. Sources say the contributions were an effort to pay back Carey for his pivotal role in helping Sweeney and his colleagues wrest control of the AFL-CIO from former president Lane Kirkland. According to a report by the federal election monitor, which was reviewed by TIME, Carey campaign manager Nash told federal investigators that the labor leaders knew it was illegal for them to make contributions to the campaign--so the money was delivered in cash and described in reports to the election monitor as proceeds from the sale of Carey campaign merchandise, including hats and T shirts. Both Burke and Blaylock have denied the allegations, but a source close to the investigation says the FBI has been able to confirm that the AFL-CIO leaders directed the contributions. An AFL-CIO spokeswoman said the federation had "no knowledge" of any of its leaders being involved in any alleged transactions.

The grand jury is digging deep into the Democratic Party's role as well, sources say. In the summer of 1996, according to court documents, Carey aides offered Teamsters donations to the D.N.C. in return for the Democrats' arranging large contributions to the Carey campaign. Federal prosecutors allege that Carey's men sent more than $236,000 to several state Democratic parties as part of the scheme. A month after those contributions were made, D.N.C. officials looked into the possibility of having Judith Vazquez, a Filipino businesswoman, donate $100,000 to the Carey campaign. The money was never collected because at the last minute the campaign determined that Vazquez, who owned a company in California, was an employer and therefore barred from making union contributions.

The plan was exposed by the surfacing of a D.N.C. memo to Carey fund raiser Martin Davis, asking for approximately $1 million in Teamster contributions to state Democratic parties. When Davis later sent the memo to Teamsters Capitol Hill lobbyist William Hamilton, he included a cover letter saying that he would let the Teamsters know when the D.N.C. had "fulfilled their commitment" to find donors for the Carey campaign. Federal probers believe the memo was written by Laura Hartigan, a Clinton-Gore campaign aide, after a meeting with Davis. Hamilton resigned from the union, and unlike the other three Carey associates, is not cooperating with the grand jury. D.N.C. officials say such a scheme was never carried out.

Last week the case took a bizarre turn when Barbara Zack Quindel, the federal officer who monitored the taxpayer-financed election, resigned after she learned that the Teamsters had arranged to make a contribution to the New Party, a small political organization to which she and her husband belong. The contribution was personally approved by Carey in March just as Quindel began her investigation. Eventually, Quindel ordered a new election, declaring at the time that Carey had no knowledge of the myriad schemes to fund his campaign, and said he could run again. Three weeks ago, she announced that she was reconsidering in light of new findings by federal prosecutors. Then she recused herself. Now both the union and the effort to monitor it are in almost as much disarray as they were a decade ago, when the government launched this campaign to clean it up.