In July 1998, the STB, with only two of three Congressionally appointed members sitting, approved the carve-up of Conrail by CSX and Norfolk Southern. One of the three slots was vacant because the term of Jake Simmons ended December 31, 1996 and he was not replaced.

At that time, the second of the three, Gus Owen, was a holdover whose term had also expired and whose serious ethical problems directly related to his tenure at the Board prevented his reappointment. The third member (and today still chairman), Linda Morgan, is called the mother of the Conrail carve-up because she publicly suggested that the friendly merger of Conrail and CSX would be disapproved by the STB.

Because Rail Labor knew that Morgan and Owen looked for every mechanism possible to give the railroads the upper hand when implementing mergers, nearly mandating that the railroads abrogate collective bargaining agreements or portions of them, most rail unions worked hard to reach voluntary agreements with CSX and NS, the two acquiring railroads.

The BMWE was unable to reach agreement because among other things, the railroads were demanding huge seniority districts through combining and realigning existing districts and lower long term wages for many. The offers made were so severe that the BMWE, which is more adversely affected by the types of changes the STB allows, rejected them.

Under the law which governs these kinds of mergers, the railroads have a right to force the union into binding arbitration if they do not reach agreement during negotiations. So in mid-November 1998, CSX, NS and Conrail served notice on BMWE and several other crafts that they wanted arbitration.

The arbitrations were conducted December 15 - 19, 1998 and heard by Arbitrator William E. Fredenberger, Jr. Fredenberger was appointed by the National Mediation Board despite BMWE’s strenuous objections.

The BMWE had instead proposed that the NMB furnish a list of seven arbitrators from which the union and the carriers would alternately strike names. "If we had been given such a list and Fredenberger’s name had been on it, we would have struck him," said BMWE President Mac A. Fleming at the time, "because we do not consider him a fair or impartial arbitrator in this area."

On January 14, 1999, Fredenberger issued his decision and gave the carriers everything they wanted; actually imposing the carriers’ proposal word for word.

"This unjust and mean-spirited decision," said President Fleming, "works a terrible hardship on BMWE members and appears motivated by anti-union animus in the arbitrator’s assault on seniority district size and contracting."

The BMWE (and the International Association of Machinists and Aerospace Workers) appealed Fredenberger’s decision to the STB on February 12, 1999. The appeals were dismissed by a decision served on May 18, 1999, at the unions’ request.

The BMWE’s request followed ratification of implementing agreements resulting from negotiations held following the disastrous Fredenberger award. While the award had placed BMWE bargainers in an extremely difficult position from which to negotiate, some improvements were won. BMWE members on CSX ratified the implementing agreement by a 9-1 margin (counted April 26, 1999) and on the former Conrail by a 4-1 margin (counted May 3, 1999).

On June 1, 1999, NS and CSX began to operate Conrail’s routes and assets, in what Barron’s called "the most complicated Transaction in U.S. railroad history, covering 45,000 miles of tracks and 72,789 workers."

On July 1, 1999, the very same William E. Fredenberger, Jr., who gave the railroads all the goodies in the Conrail carve-up, pleaded guilty to the felony charges of federal income tax evasion and possible fraud. His sentence:

five months in a federal penitentiary;

12 more months’ probation, with five of these months on "electronic home monitoring";

financial activities monitored and/or approved by his probation officer;

pay federal income taxes for 1993 thru 1996

pay $58,272 restitution to the Department of Veterans Affairs.

BMWE maintained that Fredenberger had shown utter disregard for the law when he stole from the government. Clearly, such a person would not feel bound by law in deciding a case in New York Dock arbitration.

After several months of evaluation and preparation, the BMWE filed a petition with the STB on December 27, 1999, asking that Fredenberger’s Award be set aside because it was "the product of unfair and prejudicial proceedings" and because Fredenberger was an agent of the Board and thus, a federal employee when he was involved in the arbitration, his conviction violated the duties imposed on public employees. Such a violation requires that decisions made after the violation occurred be considered void.

On January 23, 2001, the STB ordered that the BMWE’s petition was denied. The STB decided that Fredenberger was not an agent of the Board, that the BMWE did not show that his tax violation created a bias against BMWE pertaining to the arbitration, and that by withdrawing its appeal (which occurred before the BMWE became aware of Fredenberger’s criminal activities), BMWE had no further right of appeal.

"Under the STB’s view of the world, any sort of grifter, thief or felon could sit as a New York Dock arbitrator. If an affected party found out about the arbitrator’s concealed past after he rendered a decision, the aggrieved party has no remedy whatsoever," said BMWE President Fleming.

In writing to BMWE officers of plans to appeal the STB’s decision to the Court of Appeals, President Fleming said, "with this sort of cavalier disregard for the integrity of the New York Dock process, this STB has demonstrated that it has utter disregard for the rights of employees in the context of a Board-approved transaction. ... Clearly, rail labor can never succeed on the merits where the forum deprives us of due process. We must fight to have those due process rights which should be unquestioned in our democracy."