Allegations of cronyism, misdeeds leave labor panel under cloud

In 2004, Labor Secretary Elaine Chao appointed Mark Knouse, a Pittsburgh-based lobbyist and the husband of a senior Labor Department employee, to a three-year term as executive director of a multinational labor commission. But his term ended abruptly this month after a departmental investigation suggested that he used government money to pay for lobbying activities on behalf of his clients back in Pittsburgh.

Knouse's departure followed allegations of cronyism and misdeeds that have consumed the commission, leaving doubts about the future of a panel that was once considered a key element of the North American Free Trade Agreement.

Knouse told National Journal that he left the commission on good terms and that he has been exonerated of any wrongdoing. He said that the allegations came about because "someone was trying to make my life very, very difficult."

Knouse became executive director of the secretariat of the NAFTA Commission for Labor Cooperation in August 2004. The CLC was created in a side agreement to the 1993 trade pact, a move that Knouse called "a sop to the Democrats then controlling Congress who were very labor-oriented."

The commission -- like its sister NAFTA panel, the Commission on Environmental Cooperation -- was envisioned as a way to placate members of Congress who feared that NAFTA would encourage Canada, Mexico, or the U.S. to reduce labor standards in order to cut the costs of their products.

The CLC is run by a Council of Ministers -- the labor chiefs of Canada, Mexico, and the U.S. -- and the secretariat is its staff office. The commission can review allegations that a nation isn't upholding its own labor standards, but it has no enforcement mechanism, so its mission is primarily to conduct research on labor matters of interest to the three nations.

At the time of his appointment, Knouse was a lobbyist for the Pittsburgh-based law firm of Klett, Rooney, Lieber, and Schorling (now Buchanan Ingersoll & Rooney). His wife, Ruth, was then and remains the executive assistant to Chao, the U.S. representative to the CLC. The Canadian and Mexican labor ministers accepted Chao's nomination of Mark Knouse for executive director.

When Knouse took the full-time job at the CLC secretariat -- at an annual salary of more than $110,000 -- he terminated his federal lobbying registrations. But in March 2005, he filed a registration statement with the Pennsylvania Senate, declaring himself a lobbyist on behalf of the Commission for Labor Cooperation and a second client called the Technology Collaborative.

The collaborative, a nonprofit Pittsburgh economic development initiative, is the successor of the Pittsburgh Digital Greenhouse, one of Knouse's clients at Klett Rooney. The collaborative is an alliance of academic and civic institutions that provides money and assistance to technology companies in Pittsburgh.

Knouse's original registration for Digital Greenhouse said that he was lobbying for federal appropriations and training dollars for Pittsburgh projects. Knouse and his partners -- among them Robert Shuster, son of former Rep. Bud Shuster, R-Pa., and brother of current Rep. Bill Shuster -- also lobbied for federal appropriations for other Pennsylvania clients.

The CLC's rules state that the executive director "shall have no employment other than with the commission during their term of employment," except under express authorization of the Council of Ministers. Knouse told NJ that he did not receive a dispensation from the council to continue lobbying on behalf of private clients.

"It was my call," Knouse said. "I felt it was something I would be able to do. In hindsight, maybe I shouldn't have done it." He maintains that he used vacation time and his own money for any lobbying he did for the collaborative, so no government money supported his lobbying business.

But a memo produced by the Labor Department office that oversees the commission raised doubts about that claim. According to the August 18 memo, "The primary concern ... is whether the executive director has engaged in outside activities while charging his time and expenses for such activities to the secretariat."

The memo includes a list of more than 50 meals of "questionable relation to secretariat activities" that Knouse charged to his commission credit card between December 2004 and June 2006. The meals totaled more than $3,000, and the vast majority of them were with staff members of state and federal Pennsylvania legislators.

During the same period, Knouse racked up more than $3,000 in travel expenses for more than a dozen trips to Pennsylvania, and he also spent $1,800 on a trip to Texas for the inauguration of the Texas secretary of state. Knouse said he lived in Texas for 10 years, and "I know a lot of folks from Texas, and some of them are still in the government there."

Knouse says that all of the meetings charged to the commission dealt only with commission business and were appropriate because of the importance of labor issues in Pennsylvania and Texas. The investigation found only one instance in 18 months where Knouse met with a staff member from any other state.

Knouse defends this pattern, saying he focused on meeting with people whom he knew. "That was my contact base; that's where I had most of my past associations," he said. "I think you start with the lowest-hanging fruit." Knouse says he did not lobby on behalf of his Pennsylvania clients at any of those meetings.

There is no way to determine the content of the meetings included on Knouse's expense reports, but some of them may not have taken place. Knouse's records say he dined on at least three occasions with a top staff member to Sen. Rick Santorum, R-Pa. The staffer denies he ever met with Knouse.

Similarly, Bill Ries, chief of staff to Rep. Melissa Hart, R-Pa., says he knows Knouse from Pittsburgh, but "I did not have lunch with him at any time," despite Ries's name appearing at least three times in Knouse's expense reports.

"It could be an error on my part or a clerical error" made in the process of reporting expenses, Knouse said.

Lobbying experts point out that it is illegal to use federal money to lobby Congress, but Knouse said that "many of them were not lobbying meetings, but bringing them up to date on commission business."

Knouse hired several friends from Pennsylvania to work with him at the secretariat; hired a consulting firm that had been one of his clients; and added college friends of his children to the commission payroll as researchers. "It has been my experience as a manager that you hire people that you know, if you can, because then you have some understanding of what you're getting and what their work product is going to be," he said.

When he was first contacted by National Journal, Knouse said he left the commission because "my term was up next year and I decided to go ahead and just leave." After being shown a copy of the Labor Department investigation report, Knouse said in an e-mail, "It is important to point out that the questions and issues raised in this document were carefully examined by the U.S. Department of Labor solicitor and his office and that no irregularities were found and that my management decisions were found to be in accordance with the rules of the secretariat."

Randy Clerihue, a Labor Department spokesman, said in an e-mail response to NJ's inquiry, "After being alerted to these concerns by the United States, representatives from Mexico, Canada, and the U.S. discussed the matter at an August 24 meeting of the council of the Commission for Labor Cooperation. Shortly thereafter, a joint decision was made by the three countries that it would be best if Mr. Knouse stepped down as executive director."

Knouse said, "I agreed to the separation because it was clear that the countries, particularly Canada and later the U.S., wanted to reduce and ultimately close down the secretariat and that my continued presence would be detrimental to the existing employees." He was not required to repay any expenses, and his separation agreement with the CLC includes a clause releasing Knouse from liability "for any and all claims of any kind whatsoever ... which the commission ... now has or ever had" against him.

Knouse's departure is not the end of the story for the CLC. Several people knowledgeable about the commission's struggles, who requested anonymity before speaking to a reporter, verified Knouse's contention that the Council of Ministers is considering massive budget cuts for the secretariat, which receives $700,000 annually from each of the three nations.

Scenarios being considered for future years include reducing the office's budget by as much as 75 percent. Because the secretariat has produced few research reports in recent years, sources familiar with its finances say it is carrying a surplus of more than $1 million, which is leading the member nations to conclude that they can cut their annual contributions.

Bill Worona, director of cooperative consultations and administration at the CLC, is serving as the secretariat's acting executive director, but he is leaving at the end of the month. He would not discuss Knouse's departure, but acknowledged that the secretariat "is in a transition mode" and is trying to wrap up existing work. There is also an ongoing battle over whether Canadian and Mexican employees whom Knouse allowed to telecommute frequently will be reimbursed for their regular trips to Washington.

Although the CLC by design has no enforcement authority and is widely seen as unproductive, even its critics say it would be a shame if it were left for dead. Kate Bronfenbrenner, a Cornell University professor who once resisted a commission attempt to quash her research into U.S. labor/management disputes, said that despite its flaws, the CLC "is an avenue that people can use to shine some light" on violations of labor standards. "If it didn't exist, there would be nowhere to investigate these violations," she said.