Executives at North America's largest construction union took in illicit cash contributions to help get themselves elected, according to a former union official who says he participated in covering up the prohibited donations with faked receipts.

In one instance, the official says, an envelope containing more than $15,000 changed hands.

That cash — which arrived in a backroom at campaign headquarters in a brown envelope stuffed with $50 bills — was then disguised as legitimate donations from union members, said Pat Scaduto, who served as campaign finance manager for the eventual winners of the elections.

"We knew it was wrong. We knew that we were going against the election rules," said Scaduto, a former assistant business manager at Local 183 of the Labourers International Union of North America, or LIUNA. "But we did it anyways."

Scaduto filed his allegations in December in a formal complaint to LIUNA's international headquarters in Washington, but it was dismissed, because it came too long after the deadline for election challenges. Local 183's current staff fervently deny his claims, calling them "all lies."

The June 2011 elections were for the top positions at Local 183, which represents 30,000 construction workers in the Toronto area. The vote saw the union's old executive turfed after a fiercely contested campaign on which both sides spent hundreds of thousands of dollars. There were complaints of ballot-stuffing and other electoral flaws in a close contest that threatened to dethrone key power brokers further up in LIUNA's hierarchy.

Ultimately, the team Scaduto was working for, headed by now-president Nelson Melo, triumphed. Melo won his race by just 10 votes.

Scaduto also has a personal beef with Local 183, his former employer. He had been off work since mid-September after being hospitalized for a long-diagnosed panic disorder, and said he was being denied short-term disability benefits. The matter is before Ontario’s Superior Court.

He's also now out of a job: Three days after he filed his complaint, Scaduto was fired.

'Huge piles of $50 bills'

In an interview with CBC News, Scaduto said he clearly recalls the night a few weeks before the union elections when large wads of bills arrived at campaign offices.

Melo's team had been strapped for cash, he said. "It takes a lot of funding. You need to advertise – radio, TV, newspaper. Money was just pouring out," Scaduto recounted.

What's on the books

Pat Scaduto, a former official with Local 183 of the Labourers International Union, opened his campaign books to CBC News, showing what he says are receipts for union election donations. The initial receipts from April 2011 are for around $400. But the average donation rises to nearly $830 by May and tops $1,120 in June, the month of the vote.

Right around the time Scaduto says his campaign team took in a large and mysterious cash contributions, individual donations went as high as $3,500. Two union members close to the campaign donated twice on the same day, June 3, while some other campaign members made thousands of dollars in donations just a few days apart.

When contacted by CBC News, none of those donors would talk about their contributions.

So some of Melo's supporters had decided to seek donations from "various contractors" and other non-members of the union — something prohibited under LIUNA's strict election rules.

On that night in June, Scaduto said, he was in a backroom at the campaign office with now-president Melo when fellow campaign organizer John Salvador came in.

"He had this brown envelope. He practically just ripped it open. And there was two huge piles of — they were all $50 bills," Scaduto said. "There was probably between $15,000 for sure, maybe 20."

According to Scaduto, Salvador explained that the cash came from an outside source. But because outside funding is banned, the campaign had to figure out a way to disguise it as legitimate donations, Scaduto said. Melo came up with the solution: They would divvy up the money among some other union members, and have those members donate it back to the campaign.

"Nelson gave John Salvador a stack of money. He gave me $2,000. And then he called in another current executive board member, and the same thing — he gave him a stack of cash and said 'write a cheque.'"

Scaduto said he issued receipts for all those donations.  

Vehemently rejects accusations

In an interview with CBC News, Salvador denied the incident ever happened, and said he had no idea why Scaduto would claim it did. "That's all lies. I don't know where he came up with that."

Melo also vehemently rejected his former campaign finance manager's accusations, calling Scaduto "the biggest liar."

Scaduto said the cash kept rolling in from a variety of sources. He claims Melo came to him several times more with handwritten lists of names and would say, "Look, I have $2,000, $3,000 in cash; here, make receipts for these three individuals, four individuals."

Almost all the alleged dummy receipts were made out to a core group of no more than 14 close supporters, Scaduto said. But on one occasion, Melo wanted the receipt made out to a union member who didn't even know he was donating.

"His name is on the books. But to this day, this member has no idea that he made a donation, no idea," Scaduto said.

'We're not concerned'

CBC News spoke to or left messages for a half-dozen of the people Scaduto says participated in the scheme. Other than Melo and Salvador, three of those union members wouldn't comment, while another said he couldn't immediately recall what donations he had made or what receipts he had been issued.

Local 183 president Melo offered to provide documents that would clear himself and his fellow executives. But when a CBC reporter arrived at his office, the union's lawyer intervened and deflected questions to a PR firm.

A spokesperson at the firm said Melo's team has nothing to hide. "His campaign was lickety-split clean," Anne Creighton said. "We're not concerned. Our books are open."

What was at stake was more than just Local 183's executive board. The old board's relationship with LIUNA Canada chief Joseph Mancinelli had irreparably soured, and if it won re-election, it was aiming to have him voted out as vice-president of the international parent union. Instead, Mancinelli kept his post. 

If you have more information on this story, or other investigative tips, please email investigations@cbc.ca

Corrections

  • This story has been changed from a previously published version to reflect new information.
    May 13, 2013 7:00 AM ET
With files from CBC's Joseph Loiero