Sources corroborate whistleblower claims of corruption, quid pro quo culture inside powerful NYC union
FIRST ON FOX: A scathing whistleblower letter alleges corruption inside New York City’s powerful hotel workers union, including claims that union leaders accepted gifts from hotel executives, manipulated lease arrangements and improperly influenced union business in a culture of quid pro quo dealings — claims that were corroborated by union sources who spoke with Fox News Digital.
The letter, reviewed by Fox News Digital, asserts that top officials within the New York Hotel Trades Council and UNITE HERE Local 6, including President Richard Maroko, participated in actions that violated internal policies, fiduciary obligations and possibly federal law. The union denies all allegations of impropriety and organized two internal investigations carried out by third-party lawyers who found the whistleblower's claims to be unsubstantiated.
Fox News Digital spoke with the whistleblower and multiple sources with knowledge of the union’s inner dealings but is not identifying them by name due to fear of retaliation.
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"Mr. Maroko had personal knowledge of, and either directly participated or directed others to misappropriate millions of dollars of retail income," the letter states. "He accepted and allowed his Elected Officers to accept gifts of Hotel Rooms, Liquor, Gourmet Food and Electronic Items from Hotel Officials on a Quid Pro Quo System."
A source with intimate knowledge of union operations told Fox News Digital that there was a sudden shift in HTC’s culture after Maroko ascended to the presidency in fall 2020.
"For 25 years, maybe 24 years, there was a standard then that was really adhered to. [The former president] was very disciplined about it as far as receiving gifts and what you did and didn't do," the source, who has decades of experience working with the union, said. "And the past five years when the new president came in, that was completely tossed."
"Pretty soon," the source said, referring to when the rules were relaxed when Maroko took over. "It wasn't like they flipped the switch, but … it just wasn't important to him. I brought a bunch of things to his attention that he just wasn't interested [in]."
Crain’s New York Business reported in June that the Hotel Association of New York City, a trade group representing hotel interests, retained former Southern District of New York public corruption chief Brendan McGuire to investigate allegations contained in the letter.
"Two exhaustive, independent investigations, including one by a former federal prosecutor, have concluded that these anonymous claims are frivolous, lack any factual basis, and were clearly an attempt to derail contract negotiations between the union and hotel management," HTC spokesman Austin Shafran told Fox News Digital. "Thankfully, these efforts failed as our union secured the best contract in its history that will provide unprecedented wage increases and benefits to tens of thousands of hotel workers. Nothing will ever deter the union from working every day to better the lives of our members and their families."
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Key components of the letter are supported by documents and accounts from multiple individuals with firsthand knowledge and insight into the day-to-day operations inside the union’s 8th Avenue headquarters in New York City, a Fox News Digital review found.
The whistleblower letter alleges that hotel industry figures, including former Highgate labor executive Robert Lafferty and former Hyatt labor executive Michael Grosso, provided union officials with gifts including food, top-shelf liquor and electronic items.
The two investigations organized by the union, however, found no evidence of improper gift-giving.
Highgate is one of the largest lodging operators in the nation and Hyatt is a major hotel owner.
In addition to providing gifts to union officials, a former union leader told Fox News Digital that the duo of hotel executives served as "inside guys" who could keep HTC union leadership informed about what was going on in boardrooms so that they could protect their own power.
These favors, according to the longtime union leader, preceded contracts that benefited hotel owners to the detriment of workers.
"If I could cut away one department [from being unionized], you’re talking about millions of dollars per year over the life of a contract, and if Lafferty could deliver that to the owners, then what he’s now doing is changing the entire economic structure of hundreds of millions of dollars in a real estate transaction," the former union leader told Fox News Digital.
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"The union’s ability to make your property profitable or not is all its leverage. So that’s the inside that’s what’s going on there," they continued. "If you look at every time Lafferty made a deal with [Maroko] on one of these new properties, you’re going to see that all these weird deals are made where bargaining unit members are cut out. How come at your properties there’s no front desk agents? How come at your properties food and beverage isn’t under the union contract, but it is everywhere else?"
Fox News Digital has reviewed photos that appear to show hotel industry figures or their associates entering union offices with shopping bags. Two people familiar with the union’s internal operations told Fox News Digital the gift-giving was not isolated and that accepting items from hotel management would have violated longstanding union norms and policies.
Two internal investigations conducted by third-party lawyers on behalf of the union could not corroborate claims of improper gift-giving made by the whistleblower.
The longtime union member and leader attested to an unusual relationship between Lafferty, Grosso and the HTC’s leadership when speaking with Fox News Digital.
"What I witnessed was Lafferty would come upstairs and have, like, really different access than most people," the source said. "You don’t get buzzed in and meet me at the conference room. That doesn’t happen … This is like the count room in a casino. You don’t just get to walk around."
The source explained that allowing someone like Lafferty to have such open access to union offices is unheard of as management and labor have conflicting interests, and access would enable the former to potentially outmaneuver the latter in negotiations. Union leadership, per the source, allowed Lafferty into their legal office, where he could have seen plans for organizational activity.
Fox News Digital could not independently confirm that Lafferty viewed union plans or that he used them in labor negotiations.
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The former union leader went on to explain that, while they initially thought Lafferty was simply "moving up in the world" with his frequent visits, they eventually noticed that he would often bring over luxury food items from an establishment operated by Highgate to share with union officials.
"In what universe does that look good, a bunch of union reps hanging out with management eating lobster rolls at the union office?" the source said.
Another source, who had worked with the union for decades, confirmed the former leader’s account.
"They had unfettered access to the building, which I couldn't believe, they just came and went and that was just so like opposite of what we're about and any business for that matter," the source told Fox News Digital. "And they had unfettered access to the, I used to call it the Bermuda Triangle, they would go to legal, they would go to the union officials and they would go to [Maroko.]"
The HTC spokesman denied that there was anything unusual about the meetings.
"Yes, the union regularly meets with hotel management for negotiations and to resolve issues, and those individuals had no different access than any other hotel representative," Shafran said.
The longtime union leader said that it is inappropriate for union officials to accept meals paid for by management as it may create an appearance of impropriety or amount to an illegal gift if not properly reported. Neither Grosso nor Lafferty have been convicted of illegal gift-giving as of publishing.
Photographs reviewed by Fox News Digital also appear to show Grosso carrying large shopping bags into union offices.
The HTC acknowledged the veracity of these photographs, but claimed that the bags only contained a pie, not expensive food and drink.
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Following his allegedly uncharacteristically cozy relationship with union leadership, Lafferty was given a job as the chief operating officer of HTC’s Health Benefit Fund where he pulls in a total compensation of over $650,000 per year, according to the most recent financial disclosures.
"Lafferty underwent a rigorous background check and was supported equally by both union and management representatives, as well as the CEO of the Funds," the HTC spokesman told Fox News Digital.
Before Lafferty left Highgate, the whistleblower’s letter alleges that Lafferty and Maroko pressured an arbitrator on the union's independent conflict resolution board to render a decision favorable to Highgate. A federal district court later upheld the arbitrator’s rationale in the matter as well-grounded.
Maroko allegedly threatened the job of both the arbitrator and his son unless he ruled that Highgate would be absolved of monetary obligations to union members after it ceased managing a property, passing those obligations to the financial institution seeking to take over the hotel.
Maroko’s newly minted compensation package, worth nearly $1 million annually, has also come under scrutiny recently by the Center for Union Facts, an organization critical of labor unions. CUF argues that Maroko is using his members’ dues for self-enrichment.
Also in contention is Maroko’s decision to rent a building owned by UNITE HERE Local 6 to HTC at a rate allegedly far below what the space would go for on the open market. Maroko, who leads both labor entities, is accused of depriving UNITE HERE Local 6 of up to $3 million in rental revenue by allowing HTC to use its real estate at a severely discounted rate, according to the whistleblower letter.
Two sources told Fox News Digital that the lease was not approved by the union’s executive board.
"The lease was signed over 40 years ago and renewed over 20 years ago," Shafran, the HTC spokesman, told Fox News Digital. "The current administration had nothing to do with this lease and, notwithstanding that, the terms are fully legal. The lease payments were accurately and routinely reported in public filings and consistent with applicable federal law."
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Fox News Digital is also told that the union launched an in-house investigation into the letter, which it received months ago. Sources who spoke with Fox News Digital say it was a farce that dismissed the seriousness of the situation and left out key information while the union maintains the review clears it of any wrongdoing.
Vincent Pitta, the chairman of the law firm that conducted the first investigation, declined to comment on it, stating that it was "created after a preliminary and expedited review" of the whistleblower's allegations pending the union's retention of a former prosecutor to conduct another investigation. Pitta also said that the document "was a client-attorney privileged document which was stolen from our client’s offices."
A copy of the union’s in-house investigation obtained by Fox News Digital claims that its lawyers questioned 16 people across 23 total interviews, reviewed reams of documents and found that the allegations within the whistleblower report were "completely devoid of merit" and "frivolous."
The internal review purports to have found no evidence of internal gift-giving.
"We found no evidence during our investigation that supported the allegations that HTC and/or Local 6 officers accepted gifts of free hotel or discounted hotel rooms, expensive bottles of liquor, gourmet food or electronics from hotel management representatives," the report reads. "This provision of a pie and other pastries by a hotel representative during business meetings with the Union did not constitute any improper conduct whatsoever on the part of any Union or hotel management representatives and is permissible under federal laws and regulations."
Additionally, the review claims to have found that the allegedly below-market rental agreement offered to HTC was actually determined by a third-party firm and was thus not set by Maroko.
"Our investigation revealed that just two years ago, the lease between Local 6 and the Funds was re-negotiated based on a market value study conducted by an outside company retained by the Funds. The Funds’ management trustees then retained another outside company as an independent fiduciary to review all terms of the proposed, re-negotiated lease," the union review claims.
Pitta declined to provide documentation showing how his firm came to these conclusions.
Regarding the arbitration process, the internal investigation claims that the whistleblower conflated two separate arbitration processes as one alleged scheme that involved highly technical questions and produced no damages or penalties, did not lead to later lender-liability awards and did not harm hotel lending. It also said all relevant witnesses denied coercion and that the arbitration process gave both sides a fair chance to present evidence, citing a federal court ruling.
"Because the [arbitrator] acted within the scope of his authority and did not exhibit a manifest disregard for the law or issue an Award that violates public policy, the Court finds that the Award should be confirmed," a federal court wrote, explaining why it upheld the findings of the arbitration process.
One union source close to the situation who claims to have had direct knowledge of the alleged misconduct, however, told Fox News Digital that they were not interviewed as part of the internal probe.
"I kept on saying, 'When are they going to interview me?' and [Maroko] wanted no part of that. They wouldn't interview me because, from the beginning, I explained to him that it's all true," they said.
Shafran, however, maintains that the whistleblower never came forward and thus could not be interviewed.
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The summary of a second internal investigation conducted by a third-party law firm obtained by Fox News Digital further maintains that the whistleblower’s letter is factually unfounded. Citing internal messages and interviews with union leadership, the investigation acknowledges that a hotel industry representative entered the union’s office, but maintained that the bag of purported gifts he brought only contained a "pie or cake."
Additionally, the investigation purports to have interviewed three people involved in the arbitration dispute, all of whom denied foul play. The report concluded that the allegations may have been a plot to provide the hotel industry with leverage during labor negotiations.
A union representative declined to provide Fox News Digital with the primary source evidence supporting the findings of either of its investigations.
Fox News Digital reached out to Grosso and Lafferty for comment.
A veteran hotel industry leader who has dealt extensively with HTC told Fox News Digital that the allegations detailed related to improper gift-giving in the whistleblower letter were "not shocking." They did, however, call the allegations of arbitration tampering "surprising and alarming."
"It’s a letter, it’s not signed, it’s allegations, it’s not proof positive," the industry veteran went on, speaking about the whistleblower letter generally. "But its allegations are alarming, and it should absolutely be looked into because if any or all of these are true, it’s a big deal."
To date, the allegations made by whistleblowers have yet to be corroborated by any independent review or legal authority. Neither Grosso nor Lafferty have been charged with crimes connected to their alleged misconduct.