The Brothers Who Busted Philly Unions. For Good.

Brutish threats, expletive-heavy protests, oil poured at construction-site entrances–for years, Philly unions have used intimidation and bully tactics to protect their power. Then two young developers set up cameras and a website, and set in motion the most dramatic power shift the city has seen in generations.

All of the videos are voyeuristic—surveillance-quality film of a construction site. The worst ones, shot from three different angles on a sunny day in July 2012, involve the fence:

On the screen we see an engineering contractor who wants to enter the controversial Goldtex construction site at 12th and Wood streets, only to find his path blocked by eight union men. With mincing steps, the non-union contractor—a middle-aged man in a blue short-sleeved shirt—tries to sneak in behind them, sidling through a narrow gap between a temporary chain-link fence and a stone wall. But the union men spot him, move toward the fence, and start to lean against it. Then we see four of them take turns pushing—using the fence like a microscope slide to fix the contractor against the wall. In one of the videos, you can hear the man start to cry out, his voice tremulous as he’s crushed. Finally, he slumps to the ground.

The most troubling part, though, isn’t the sight of the men trapping the contractor; it’s the brief glimpse of one of the protesters grinning as the contractor wails. And the way the union guys stroll casually away from the scene when their victim collapses.

“It’s standard for construction sites to have surveillance cameras,” says one of the two 30-something brothers responsible for capturing the incident on video, Michael Pestronk. “The only novel thing we did, which just seemed obvious to me, was to post the videos on the Internet.” And with that, everything changed.

 

Until this year, getting something built in Philly meant meeting union demands. No one had dared to challenge the power of this city’s Building and Construction Trades Council, a consortium of nearly three dozen unions representing 45,000 people. Then Matt and Mike Pestronk undertook the renovation of the old Goldtex ladies’ shoe factory in the Loft District part of the city, a 10-story building they planned to convert into 163 apartments.

A $38 million project, the Goldtex deal is just the sort of high-profile, good-money job this city’s unions have held a lock on since—well, forever. But the Pestronks first did the unusual: They bid the job out to both union and non-union contractors. Then they did the unthinkable: They awarded union contractors just 40 percent of the deal, including demolition and electrical work. The rest isn’t history so much as history in the making.

The unions responded to the Pestronks fiercely, declaring a mixed site of union and non-union workers a “disaster” and refusing what work they were offered. “All or none” went the battle cry, a herald of time-tested tactics.

As early as January, protesters began passing out fliers, chanting, and marching with signs. Eventually they blocked delivery trucks hauling in materials and equipment. They harassed non-union counterparts, daring them to fight. A few times, push came to shove. They poured oil across the site’s entrance. They printed fliers with a photo of Matt Pestronk’s wife superimposed with an erect penis and the oddly oblique message “Carrie Pestronk likes to get hard with it.”

They planted caltrops, old-school union contraptions made of nails and designed to flatten tires. And they uttered nasty, brutish threats. The brothers say that Building Trades business manager Pat Gillespie told them that unless they hired an all-union workforce, the project would “never get built.” Another time, as Michael Pestronk entered the worksite, voices cried out among the protesters: “You’re dead!”

There’s more, but all of it is typical of the rough-and-tumble sport of Philadelphia development. What was new was the response. Instead of cowering or capitulating, the Pestronks used batteries of video cameras to record the activities of picketing union members, which they posted online at YouTube and a website they dubbed “phillybully.com.” And the effect was galvanic.

For many years, Building Trades has been criticized—usually in fearful whispers—for stifling development and economic growth, shutting out new investors, and undermining this city’s entire political process. But the videos shot and posted by the Pestronks provided something to go with all those allegations: evidence. Footage of leering, chuckling union men spitting profanities—so afraid of losing what they have, they can’t see what they’ve become.

Since the first videos went up in spring, the tide of public sentiment has turned, and the Pestronks won a court order restricting the picketers’ behavior. But in coming years, the Goldtex battle and the techniques employed there may be seen in grander, historical terms: as the moment that started the unraveling of Building Trades’ vast economic and political power, and perhaps of Philadelphia’s entire power structure.

So this is a story about more than how new-school technology defeated old-school bully tactics. It’s a story about how a single apartment building, and the two guys who wanted to build it, created the opportunity for an entire city to come unstuck in time.

Matt Pestronk is 35 years old, a former college and high-school wrestler, with close-cropped hair, a coal-stove build and a broadly outspoken demeanor. “Fuck them,” he says at one point, joking about his union adversaries. “We can take any of those guys.”

Michael is 31, also a former high-school wrestler, with a shaggy artist’s mop of hair and a slightly more politic personality. “I’d be happy to use all union guys,” he says, “but the numbers have to work.”

I first meet the Pestronks in August, at the Goldtex site, and find them unbowed. Neither of them seems likely to be scared off by politicians or the unions, whose antics apparently have left them mostly mystified. To hear them tell it, they came to Philadelphia to be developers but found themselves face-to-face with union bosses straight out of old-time Hollywood epics—heavy-handed, thick-necked men with enough disregard for the law to issue death threats over an apartment conversion. For the Pestronks, this was like seeing a woolly mammoth come charging across the plains.

When I ask why they took on a battle no one else in Philadelphia would tackle, they look at me like I’m the odd one.

“We didn’t start this fight,” says Michael. “And as for why we’ve stayed in it, the law is on our side. Why should we give in?”

Philadelphia Building Trades business manager Pat Gillespie portrays the Pestronks as out-of-town richies, “born on third base” and bent on “destroying the wage structure” for all of Philadelphia. But the Pestronks deny any grand plan. “We’re not interested in shifting any paradigms,” Michael says. “Breaking the unions is still not on our agenda.”

For the Pestronks, the Goldtex equation begins and ends with economics. They sought bids for the job. When the results came in, they calculated that going all-union would run them an extra 40 to 50 percent in labor costs. Some unions, like the electricians, offered a competitive combination of cost and delivery time, or negotiated. Others didn’t. The Pestronks wound up awarding 40 percent of the job to unionized contractors. They didn’t concern themselves with how Trades would react to winning less than half the work, figuring any protest would be small. “To be honest,” admits Michael, “we were probably a little naive.”

Born in Fairfax County, Virginia, one of the richest regions in America, Matt and Mike Pestronk admit they’ve enjoyed some advantages. “We weren’t born on third base, like Pat claims,” says Michael. “I’d say we were born on second. Our parents put us through college. But they didn’t give us a dime, ever, toward this business, or provide any connections. We did this on our own.” Ironically, their mother, Deborah, was once a dues-paying Teamster while working as a travel agent for Pan Am.

Matt earned a history degree at Drexel. But Michael never graduated, leaving college after a couple of externships convinced him that doing deals beat studying them. In 2007, they launched Post Brothers, a name with family history: A great-grandfather, Max, made uniforms in Manhattan with an outfit he called “Post Manufacturing,” to hide his Polish heritage.

The brothers soon earned recognition as a canny development team, capitalizing on the influx of new families in Germantown and Mount Airy. Since 2007, they’ve completed four rehab projects in the area and started three more. Those early projects were small, enabling the Pestronks to hire mixed union and non-union crews without attracting attention. In fact, they encountered the unions only once. While building the Delmar Morris Apartments, on Chelten Avenue, Michael received an unexpected visitor in the lobby.

“We want to make sure this job is all good,” a man said, announcing himself as a member of Building Trades.

He was big and beefy enough to intimidate, and Michael knew enough about the city’s union culture that he recognized “all good” as code for “all union.” But he responded with youthful bravado: “It’s all great!”

“Is the job all-union?” the man asked.

“I don’t know,” Michael said. “We just hire the most qualified people at the best cost.”

The next day, Michael got a call from a man who said he was from the Trades.

“If you don’t go all-union,” he said, “we’ll be there tomorrow with pickets.”

“If you want to come out here to the corner of Chelten Avenue and protest,” Michael replied, assessing the neighborhood as an unlikely place for a media firestorm, “you’re going to look ridiculous.”

No one showed. But if this was victory, it came too easily. Because whatever the Pestronks understood of Philly, its union history made no mark on them. They didn’t really understand the footsteps they were following in.

The name “J. Leon Altemose” remains a flashpoint in Philadelphia—associated with union-busting and the right-to-work or “open shop” movement. In 1972, Altemose, an East Norriton native and contractor, proposed to build the Valley Forge Plaza with a mixed force of union and non-union workers. Building Trades countered by amassing 1,000 men and storming the site. In a sophisticated paramilitary action, they assaulted the planned $18 million hotel, office and retail complex with firebombs and hand grenades, causing at least $300,000 in damage. Months later, union men beat Altemose at a Center City bank. It was perhaps the most audacious display of muscular, unionized lawlessness in modern American history. But the contractor persevered, finishing the project without union workers. The dispute put 11 union members in jail. And Altemose remains widely credited—or derided—for opening the Philadelphia suburbs to mixed and entirely non-union job sites.

The war next door, however, never crossed our borders. Building Trades spent the next 40 years accumulating political power, seeking to keep the ghost of Altemose at bay. Then the Pestronks showed up.

“There’s a general sense that this is the acid test,” says Frank Keel, a spokesman for electricians union head John Dougherty.

The fear, for the city’s unions, is that if they lose at Goldtex, what happened in the suburbs will happen here. And it isn’t unfounded. Industry observers Mary Tebeau of Associated Builders and Contractors, a largely non-union trade organization, and Kevin Gillen, of Penn’s Fels Institute, say they’ve been in contact with numerous developers, in and out of town, who are rooting for the Pestronks to succeed and open Philadelphia for business.

Indeed, the stakes are so high that most people contacted for this story declined to be interviewed or spoke only on condition of anonymity.

I was able to interview enough people at the core of city development, however, to understand the issues involved, a lesson that starts with the following unworkable equation: We have Cleveland rents and New York construction salaries.

Class A office space here rents for about $26 per square foot, about the same as Cleveland. Yet our unionized construction workers earn wages competitive with those in rich real estate markets like San Francisco, Chicago and New York, where rental rates can be double those found here. A Philadelphia carpenter makes nearly twice as much as his counterpart in Washington, D.C., where similar space rents for almost twice as much. The housing market fares no better. A 2008 report by Econsult found it to be unprofitable to build in most of Philadelphia, ranking it below even Madison, Wisconsin, as a desirable place for new construction.

These discrepancies hurt us all, even shifting our demographics. According to Gillen, the economics of our Trades unions hinder middle-income developments and force developers toward high-end luxury residences. Yet Building Trades flaunts its power with labyrinthine work rules and outrageous demands. Most famously, the Comcast tower was equipped with two sets of pipes—one “green” and functional, the other old-fashioned and disconnected—to feed the union beast. But the Trades are an everyday drag on the local economy. Union plumbers must call in the electricians if a single wire needs to be moved.

This sort of high strangeness is taken as a given here in Philadelphia. But to the Pestronks, it was merely strange. Sometimes, fresh eyes make all the difference.

 

Michael Pestronk says that last January he was driving in his car, guiding a potential creditor to his company’s offices in Germantown, when he noticed the banker’s wasn’t the only car following his.

Fred Cosenza, a high-ranking Building Trades official, declined to comment for this story. But Pestronk says that Cosenza had tailed him for a couple of weeks before that day. Fearing Cosenza might spook the banker, Pestronk picked up his cell phone. “I need to stop for gas,” he lied to the banker, giving directions to go on to the office without him.

Pestronk pulled into a Sunoco at Wissahickon and Rittenhouse. But instead of stopping at a pump, he tooled out the other side of the lot and parked behind Cosenza, who had pulled over on the side of the street.

Pestronk says that when he emerged from his car and confronted Cosenza, the union man looked startled but quickly composed himself. “Hi, Mike!” Cosenza said cheerily.

“Fred,” Pestronk said, “what are you doing?”

“I’m just out for a drive,” Cosenza replied.

“Don’t play dumb, Fred. You’ve been following me for weeks.”

“Did you just call me dumb, Mike?” Pestronk says Cosenza answered. “’Cause if you did, I’ll smack the shit out of you.”

“All right, Fred,” Pestronk said. “I’ll see you around.”

By now, it might be appropriate to wonder how anything ever gets built in Philadelphia. The answer is that out of custom and self-interest, an unofficial compact has emerged by which this city’s Trades, developers and politicians have learned to get along.

The Pestronks say they’ve been told by people within the development community that certain established builders get better labor rates than they were offered. Multiple sources inside Philadelphia’s development community say that information is correct. “It isn’t like the unions ever work for market rate,” says one developer, who requested anonymity for fear of retribution from the Trades. “But instead of coming in 40 or even 50 percent over market, they’ll come in at 20 percent. Maybe throw in some government subsidy, and it’s just enough to get the deal done.”

The arrangement has dark ramifications for the city’s economy. “The issue,” says one elected official, who also asked for anonymity, “is that a younger developer or an out-of-town developer gets a vastly different price than someone who has a relationship with the unions. There is a kind of old-boy ne­twork involved. And there is an element of protectionism to it. The established developers complain about the unions. But they cut deals with them and enjoy the fact that the unions reduce any competition they might face.”

Another developer, who admits to “cheering the Pestronks on,” typifies any benefit received as unasked-for­—as a dose of sugar to go with the poison on offer. He says the reason better-established developers don’t challenge Building Trades is more p­ersonal: “The Pestronks are young. They have that fire in the belly. [The rest of us] are a lot older.”

Either way, it all comes out the same: A handful of developers gets rich while the city’s tax structure and union labor costs stymie the local economy. And Philadelphia’s elected officials sit on the sidelines.

Inquirer reporter Bob Warner has published a series of stories quantifying the amount of money Johnny “Doc” Dougherty donates to local politicians. Dougherty, the boss of Local 98, annually funnels $2 million into state and city races, circumventing campaign contribution limits by funding political action committees that lavish his favored candidates with cash. The Trades have it in their power to acquire huge stakes in any city politician. A review of 2011 political campaign filings shows City Council representatives Bill Green, Mark Squilla and Bobby Henon each received roughly 20 to 25 percent of their funding from Trades-related sources.

These numbers encourage Council members with little union support to stay in line, if only to forestall a future Trades-backed opponent. As an example, Council-
woman Maria Quiñones-Sánchez didn’t return calls requesting an interview for this story. Councilman Wilson Goode Jr. can’t get off the phone fast enough: “I’m not going to give any interview on this,” he says. And even Mayor Michael Nutter, who was elected without support from Trades, sticks to the shadows. Emails I obtained show his administration quietly helped the Pestronks work with city cops to maintain order at the site and transport a crane past a union blockade. Given Nutter’s reputation for running a top-down administration, the emails should indicate his sympathies. But in Philadelphia, not even a sitting Mayor with no need to seek reelection can risk an open war.

One of the first steps I took in reporting this story was to try to substantiate the arguments made by union boss Pat Gillespie:

  • The unions fight to maintain fair compensation for the entire region, while the Pestronks pay workers, many of them illegal immigrants, substandard under-the-table wages that deny this city its due taxes.
  • No illegal acts have been authorized or countenanced by union leadership.
  • The Pestronks behave more irresponsibly than union picketers, allowing workers to wave their cash in mockery of his out-of-work men. “They have selectively edited those videos,” Gillespie tells me, “to show illegal acts where none occurred or to remove the ways in which picketers were provoked.”

But along the way, I meet more compelling spokesmen than Gillespie. An ironworker named Danny MacDonald Jr., from Delaware County, tells me how well the unions treated his family after his father died in a fall. “Will any of these non-union guys, and their families, receive those kinds of benefits?” he asks.

Similarly, during an interview at Jany’s, a diner near the Goldtex worksite, Ironworkers business agent Ed Sweeney tells me that after he was hurt on the job in the late ’80s, he received more than $7,000 in donations from union men he’d never met. Remembering those days, he starts to cry, wiping his eyes to make sure no one sees.

The moment is entirely unexpected, but those big, wet tears serve as a telling reminder that there is something to mourn here. This country’s unions saved lives and established a baseline of treatment for American workers: The 40-hour workweek. Health benefits. Safety standards. Paid vacation. And yes, a living middle-class wage—standards set for the rest of us by labor-union negotiators. But somewhere along the way, the Philadelphia Building and Construction Trades Council stopped being an underdog and started behaving like a bully.

The Philadelphia media has dutifully reported all of Gillespie’s charges against the Pestronks. But Gillespie could offer me no proof. A lack of ammunition, however, doesn’t stop some of this city’s Trades-
affiliated politicians from firing off the same accusations. In a phone interview, Congressman Bob Brady, a card-carrying member of the carpenters union, states that some workers at Goldtex are being paid under the table. “That’s documented,” he says, multiple times.

When asked for the documents, however, Brady refers me to Councilman Jim Kenney.
The Councilman responds that union men heard laborers supposedly working at the Goldtex site talk about cash payments while “drinking in bars.”

“There are no documents,” Kenney says.

 

By the time September 6th rolls around, the Post Brothers site has calmed. “We have a negotiation set up with the Pestronks,” Gillespie tells me in a phone interview, “and we’re optimistic. So we want a new tone over there.”

The Pestronks deny any breakthrough. “We’ve done this before,” says Michael Pestronk, on-site. “They’re jerk-off meetings.”

The Pestronks also find no reason for optimism in Bob Brady’s participation in the negotiations. “I think he’s there to make sure things work out,” says Matt, “in a certain way.”

“At some point,” says Michael, “he always turns to us and says, ‘You know, it’d be a shame if someone were to get hurt.’”

But around noon, two hours after the meeting begins, the union protesters depart the Goldtex site and don’t come back. Something has happened. And in the coming days, it emerges that Brady successfully brokered the bare outline of an uneasy detente.

The Trades swear to end their protest and begin whatever work is still available on the Goldtex building, as part of a mixed site of union and non-union workers. This is a radical about-face. In return, they asked the Pestronk brothers to make one of their next major jobs all-union.

That next job, the Atlantic Building, a 21-story high-rise on South Broad Street just two blocks from City Hall, is undoubtedly a prize. The Pestronks plan to rehab the whole building, installing retail to go with 300,000 square feet of apartments. A successful project there, without union labor, would send the signal that Trades dominance of the marketplace is clearly over. But the Pestronks refuse to commit one way or the other, insisting they’ll bid the project out, just like Goldtex.

What the Pestronks do concede is a preference to go all-union, and to that end, they begin discussions with the Trades about financing. They also grant the unions a coveted “last look” at any other bids.

“I essentially gave the unions the last look on Goldtex, too. I went back and told them the lowest bid,” says Michael Pestronk.

The talks seem to render the Trades’ continued dominance uncertain at best, yet they claim total victory. “They made a commitment to make their next job all-union,” Gillespie tells me during a follow-up phone interview.

Really? Didn’t they say they’d bid it?

“They commited to us,” Gillespie replies.

“But, Pat,” I ask, “Michael Pestronk did say they would bid the next job, yes?”

“Yes,” says Gillespie. “But I interpret that as a commitment.”

Gillespie’s certitude could be taken as pure spin, or it might simply reflect his acumen—a knowledge of how union power will play out in the coming months.

Multiple observers of the Building Trades say the financing the carpenters and electricians can provide from their billions in pension funds is delivered at well-below-market rates. These loans can help offset some of the upcharge on union labor. And the unions might simply offer the Pestronks a much lower rate—granting them one-time-only admission into the unofficial club of developers who get preferential treatment.

Of course, darker possibilities exist. Pledging that the unions will receive the “last look” at bids could chill potential non-union contractors. “It’s a decision every business will have to make for themselves,” says Mark McMahon, a builder and board member with Associated Builders and Contractors. “But would you invest the time and money it takes to bid a project that big knowing that you’re not the preferred candidate and someone else is going to get a last chance to beat you?”

Of course, given what’s already taken place, what happens on the Pestronks’ next job might not even matter.

In the coming months, it seems unlikely that anyone’s behavior will change. Politicians, our major developers and the Trades will operate as normal, even as the ground around them has already shifted.

It’s a change Matt Pestronk announces, inadvertently, when he arrives at the Goldtex site in September, a few days after the protesters departed. “Holy shit!” he exclaims. “Wow!”

Directly in front of him, some 20 yards away, sits a hulking industrial truck pouring freshly mixed concrete into the old factory’s basement. “We’ve been trying to get this for months,” muses Matt. “We get this deal with the unions, and now? It’s here.”

In the meantime, the Pestronks purchased two small mixers of their own—a process that took five times as long and cost 1.5 times as much. “Do you believe this?” Matt says when he sees his brother.

The truck might seem the unions’ version of an olive branch—a two-ton behemoth churning peace. But behind the scenes, says Matt, the Trades still wage war. Chased away by cameras, court orders and bad publicity, the unions now call vendors and pretend to be the Pestronks: “They’re saying stuff like, ‘We’re sorry, we’re not going to be able to pay you.’”

This, too, is an old-school labor tactic. But the Pestronks aren’t upset. The Trades traditionally chase developers away from non-union labor by threatening them with complications like extra expenses for security to combat protesters and delays from blocked deliveries. But the Pestronks are showing that beating the unions costs less than acquiescence. “We’re saving millions doing it this way,” Michael Pestronk says, “even if we have to go back to mixing our own concrete.”

The upshot is that this story’s unanswered questions—like what will happen on the Pestronks’ next job—aren’t as important as they appear. Think of it this way: Does anyone really remember what J. Leon Altemose did after he opened the suburbs to non-union contractors?

There is a desperation about the unions now. Just before deadline, electricians boss Johnny Dougherty finally weighed in, saying, among other things, “I’d be afraid to move into those [Goldtex] apartments … because there will be ongoing protests after they open the place.”

This is detente? But such rage might only mark the dying of the light.

The Pestronks may already be entering rarefied air, their primary importance symbolic. “I think the Philadelphia market is sitting there on the table,” says McMahon, the contractor and board member from ABC. “If the Goldtex site is a success, I think it will send a message that all that’s needed is a strong, willing owner, and you can build in Philadelphia without the unions. It doesn’t really matter what the Pestronks do next, because they already set out a template.”

Those videos, published online, now need only inspire imitators—other developers interested in quelling the unions’ most aggressive intimidation tactics. As a result, Philadelphia is at a tipping point—teetering on the verge of its own Arab Spring.

On its face, any analogy with recent revolutions in the Middle East might seem overstated. There is less at stake in Philadelphia—no actual dictators to overthrow. But the Trades have long served as a kind of shadow government, picking many of our leaders for us and even determining what we can build. In these terms, any dollar the Trades lose is a dollar less they can use to buy political heft. Any movement that deprives them of power is re­volutionary—opening new channels by which Philadelphia might grow its economy and choose its elected officials. And this city’s revolution may well move in the same way that change came to the Middle East, one domino toppling into the next, one non-union job leading to another.

The victory for open-shop contractors, it seems, is either already won or startlingly close. The only question is if they’re willing to claim it—to push beyond the victory the Pestronks say they never intended to achieve. All that’s needed now is for a specific moment to become crystallized as part of this city’s history: the stunning, fleeting vision of two young Virginians who not only stood up to the city’s Building Trades, but put themselves in a position, one fall morning, at the tail end of war, to gloat.

“Tell me,” says Matt Pestronk, grinning as he stands beside his brother, cement pouring into the basement of their open-shop w­orksite. “Do we look like we’ve lost?”

  • bill turner

    This union is breaking law that are on the books to protect the American citizen. This is not just harassment. How can this one law override all of the other laws on the book. Why can’t they use the tapes to pick out individuals that are committing these acts and have them arrested. This law may protect the Union as a whole but how can it protect the individual braking the other laws.

  • Sue

    I don’t like the fact that the Pestronks give the unions a last look at the bids…this hurts the private contractors and gives the unions an unfair advantage.