The loans were made by the Royal Bank of Pennsylvania, headquartered in King of Prussia, said union and bank officials.
Union officials are negotiating to keep the bank from foreclosing on the property, said a union source.
The loans were intended to help the union's cash-starved John F. Kennedy Memorial Hospital in Northeast Philadelphia. Serious cash-flow problems at the hospital became public earlier this month when the hospital acknowledged that it had to use more than $300,000 in early payments from the union to meet its payroll.
Ronald "Reds" Mauldin, District Council 33's vice president, confirmed yesterday that Stout had borrowed the money from Royal Bank. "As far as I know, only Earl Stout" sought the loans, Mauldin said. "I'm positive." Mauldin said he knew of no executive board approval of the loans.
Art Mullin, executive vice president of Royal Bank, confirmed yesterday that Stout, on behalf of the union, took out the loans.
"We have made a number of loans to District Council 33 and its related entities for business purposes," Mullin said. Mullin described the collateral used for the loans as "union assets and assets of related entities."
He declined to discuss the loans further. He emphasized, however, that the loans were not personal loans made to Stout.
One District Council 33 member knowledgeable about the loans said that the bank "could have foreclosed awhile ago" on the collateral because the union has had trouble meeting payments.
Sutton, the former head of the city's sanitation-workers union who defeated Stout on May 10, could not be reached yesterday for comment.
Although Mullin declined to specify how many loans Stout took out on the union's behalf, another source said that "three or four loans" were from Royal Bank and that union real estate and cash investments were put up as collateral. They included District Council 33's headquarters at 30th and Walnut Streets, JFK Memorial Hospital, and a union medical-clinic building and its $2 million lithotripter, an instrument used to pulverize kidney stones.
Some cash investments totaling as much as $5 million also may have been used, said the source.
Stout became involved in the hospital's financial problems because as union president, he also headed the executive board of the hospital.
The extent of the hospital's financial plight has come to light only since Sutton took over. Hospital spokeswoman Barbara Chavous said Sutton and the hospital's board were taking steps to remedy the cash-flow problem pending the outcome of an audit and management study of the facility.
The hospital has lost money for three years, according to Mauldin. He also said that although the union advanced the hospital more than $300,000 earlier this month, union officials had no intention of funneling more cash into JFK.
"If the hospital's going to work, it's going to have to work without contributions from District Council 33," Mauldin said. In the future, he said, the union would only contribute its customary medical plan payments to the hospital.
Questions about the operation of the hospital were raised in the spring when The Inquirer reported that Stout's son, William, was being paid $92,000 a year as a hospital official. Before that, William Stout had been a mechanic working for the city.
William Stout was fired from his job within 12 hours after his father was defeated in the union-presidency vote.
Union sources also said yesterday that in the week before his departure
from the union, Earl Stout used more than $87,000 in hospital funds to make prepayments on two life insurance policies that named his wife, son and daughter as beneficiaries.
