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How Knox drew wrath of Teamsters' past chief

He bought - and closed - a beverage firm. But severance pay that was promised never came through.

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When Tom Knox announced in 1989 that he was dismantling a North Philadelphia beverage manufacturer he owned, he told The Inquirer that closing and selling the plant would generate the cash to pay a "substantial" severance to laid-off workers.

But talks between Knox, now a Philadelphia mayoral candidate, and 31 unionized workers of Kasser Distillers Products Corp. in Feltonville broke down. The union said Knox promised to pay severance to all the laid-off employees but went back on his word.

An administrative law judge agreed with the union. The judge said he was "not persuaded" that Knox and a business partner had "truthfully testified."

During a 1990 hearing, Knox had sounded conciliatory, saying that if his company's board would not pay for the severance of all the employees, including five whose packages were in dispute, he "would pay for them out of his own pocket."

But neither Knox nor his company ever paid severance to any of the 31 employees.

Kasser appealed the ruling, and the case became bogged down in the National Labor Relations Board process. By 1993, when the government sought an order forcing Kasser to pay, Knox had sold the company's remaining assets to a New Jersey company, which went bankrupt.

In 1994, five years after being promised a "substantial" severance package, the employees were paid 14 cents on the dollar of what they were owed, said Dawn Goldstein, an NLRB lawyer.

Knox's handling of the Kasser closing provides a glimpse into his management style, which Gov. Rendell has described as abrasive and has suggested might not play well in City Hall if he is elected mayor. Knox was Rendell's deputy mayor for 17 months in 1992-93.

Josh Morrow, Knox's campaign manager in next Tuesday's Democratic primary election, said Knox, who would not comment for this article, did nothing wrong. "Tom is proud of his record, creating hundreds and hundreds of jobs in and around Philadelphia, and will use his same managerial know-how in running the city," he said.

Morrow also contended that The Inquirer has not cast the same critical eye on Knox's chief rival in the latest polls, former City Councilman Michael Nutter.

An embittered former Kasser employee contacted The Inquirer after an article on April 26 noted that Knox considers himself compassionate and portrays his business career as an unbroken series of triumphs. ("I've been successful in every one of my businesses," he said in Sunday night's mayoral debate.) The multimillionaire insurance executive counts his brief stewardship of Kasser as a success because he made a profit by breaking up the company and selling its components.

"I've seen Knox's campaign message and he believes in giving people a second chance," said Albert "Tom" Tomlin, 70, of Broomall, who said he received a Kasser severance of about $300 for 32 years of service. "Yet the people who were fired at Kasser's weren't given a second chance."

Of 11 former Kasser employees interviewed, not all were sour. Some said they might vote for Knox because he is a tough manager.

The money that Knox and his Kasser partners saved by not paying the promised severance - $80,000 in all - was small compared with the price that Knox paid in legal fees, and in lingering ill will from the dispute.

By picking a fight with Teamsters Local 115, the union representing Kasser employees, Knox created an enemy in its powerful leader, John Morris, who has since died. And that cost Knox critical support for a post that Knox coveted.

At the time, Knox was a board member at Independence Blue Cross and was hoping to ascend to the position of chief executive. But Morris and his labor allies on the Blue Cross board threatened to block Knox's appointment because of his treatment of Kasser employees, according to NLRB records. And Knox, in interviews, acknowledged that he was unable to overcome union opposition before the board sought an alternative, naming G. Fred DiBona in 1990.

While the Knox campaign declined to address specific points in the dispute, Knox's former business partner at Kasser, Arthur Mullin, said in a telephone interview that he regarded the issue as a small matter. Once Knox sold the company, Mullin said, Knox was no longer responsible for the severance obligation.

Mullin said he was unaware that the workers did not receive full payment.

"I'm shocked to hear the severance was never paid," he said.

Today, the Kasser complex at Luzerne and American Streets is owned by a concrete company and used for storage. The glass-block windows are broken, and the yard that employees once mowed is overgrown and ringed by razor wire. A large, rusting sign on the roof still advertises the company's signature brand of gin and whiskey: "Kasser's 51."

Kasser did not distill products, but bought in bulk - whiskey, gin, pure-grain spirits - and blended and rebottled the ingredients into several lines marketed under a family of Kasser brands. Chateau Luzerne, a jug wine named for the street in front of the plant, was a top seller.

Knox bought the company in 1988 from the Kasser family, with the hope of turning it around. John Bondur, a businessman whom Knox hired to run the company, said it lost money from the start. Knox, who owned 63 percent of the company, fired Bondur in early 1989 as losses continued to mount.

By mid-1989, Knox sounded optimistic in an Inquirer interview: "This thing will look like a money machine in 60 days."

Two months later, Knox announced that he was closing Kasser's doors after the company had been in business 65 years, blaming declining alcohol consumption. He said the company's brands, property and equipment would be sold off, generating cash to pay off creditors and to provide financial parachutes to more than 30 production workers.

Over the next two months, Knox and Teamsters negotiators bargained over severance terms - and finally settled on a payment of two days' pay for each year of service. A major obstacle was whether the company would pay severance to five employees who found other work after the company announced plans to close, but before Kasser shut down.

Mullin, who was chief financial officer, recalled that the partners wanted to take a stand against paying the five workers "as a matter of principle."

The five employees with new jobs did not need help, he said. "The whole purpose of severance is to provide these people with a cushion," he said.

The payment to those five workers - four of whom worked for more than 20 years - would have totaled about $15,000.

The union, however, was equally adamant on principle that all 31 employees receive severance, including the five who departed early.

"It's hard to sell a severance package if you leave five people out," said Jim Smith, the current secretary-treasurer of Local 115. "It flies in the face of unionism."

According to the NLRB's decision, Knox finally agreed in a telephone conversation with union negotiator Gerald Sheehan to include the five contested employees. Sheehan said that he told Knox he had made a "major step." The two quickly wrapped up other unsettled details.

"Do we have an agreement?" Sheehan said.

"Yes, we do," Knox replied. (The judge noted later that Knox did not dispute saying this.)

But Knox and Kasser delayed sending a written contract to the union spelling out the deal. Nearly four weeks later, Mullin told the union that the company did not have an agreement after all - and it would refuse to pay severance to the five employees.

The union complained to the NLRB.

At a 1990 hearing, Mullin told Administrative Law Judge Elbert D. Gadsden that Knox, who was chairman of Kasser's board, had not had authority to negotiate an agreement on the board's behalf. The judge - as well as later review panels - disagreed.

"I do not find that Knox or Mullin ever communicated any limitations on Knox's bargaining authority to the union," Gadsden wrote in his decision. "To the extent that their testimony may be construed that they did so communicate, I discredit their accounts because I was not persuaded by their demeanor that they truthfully testified that they did communicate limitations on Knox's bargaining authority to the union."

Almost as an aside in the case, Knox testified that he was willing to make the employees whole even if the board did not approve.

"Well, if they won't approve it, I'll pay it out of my own pocket," Knox said he told his business partner, Mullin. But the NLRB found that Knox's promise was never communicated to the union, and so he was not obliged to honor it.

By the time the bankrupt company that bought Kasser paid the 31 employees their severance, the collective payout totaled $11,168 of their original claim of about $80,000, said the NLRB's Goldstein.

Most employees moved on with their lives and lost track of the case. Of 11 former employees contacted by The Inquirer, most were unaware of the testimony and unaware that the reason their payout was so small was because a bankrupt company had taken on their severance obligation.

There is some lingering animosity among the workers.

Knox "just milked it dry until there wasn't anything that was left," said Tomlin. "He could have just paid people at the beginning."

"A lot of people think Knox is for the little man," said Dehaven Certaine, 69, now a night security guard at a Philadelphia church. "But he's not for the little man at all."

"How would you like to be 60 years old and lose your job?" said Nicholas Pulaski, 78, who worked at a box factory for seven years after he was laid off.

But not all the employees feel aggrieved. Some accepted their fate as the way of working people in the world.

"As far as Mr. Knox is concerned, I don't have anything against him," said Elbert Stokes, 66, who is unemployed. "I just happened to end up on the short end. He was doing it for business reasons. Most of the jobs I've had, they do the same thing.

"If you see Mr. Knox, ask him if he has a job for me."

Frederick Brooks, 73, one of the five employees who left early, to take a job as a University of Pennsylvania janitor, said Knox was the "worst boss I've ever worked for - the worst."

"I'm not satisfied with the way Mr. Knox treated us," said Brooks, of West Oak Lane. "You think after spending 20 years with a company, they'd be happy to give us a severance."

One might thus expect that Brooks might not vote for Knox. But Brooks thinks the city is in a downward spiral, and needs a firm hand to bring law and order.

"I don't like what Knox did, but I think he may be good for the city," said Brooks. "I hate to say it, I think he'd straighten these city unions out the way they need to. He plays hardball."