Detroit — Federal prosecutors labeled the United Auto Workers and Fiat Chrysler Automobiles NV as co-conspirators in a widening corruption scandal, an allegation at odds with claims the labor union and automaker were victimized by rogue employees.
The allegation, contained in a federal court plea agreement obtained by The Detroit News on Tuesday, potentially exposes the automaker and the UAW — a cornerstone of the modern American automotive industry — to criminal charges, fines and governmental oversight, according to a former federal prosecutor.
"This does not bode well for Fiat Chrysler and the UAW," said Peter Henning, a Wayne State University law professor. "All along, the union and Fiat Chrysler have portrayed themselves as victims, but this indicates the government has a different view."
Federal prosecutors say the union and Fiat Chrysler conspired from before 2009 through 2015 to violate the Labor Management Relations Act and the automaker enabled nepotism to flourish at a blue-collar training center. The law prohibits employers or those working for them from paying, lending or delivering money or other valuables to officers or employees of labor organizations — and from labor leaders from accepting such items.
"From in or before 2009 through 2015, FCA executives conspired with one another, with FCA, with officials at the UAW, and with the UAW, to violate the Labor Management Relations Act," prosecutors wrote in the court filing.
It's the first time FCA and the union have been identified separately from individuals in the case. The government has not brought charges against either the company or the union.
The federal claim of a high-level conspiracy between Detroit’s No. 3 automaker and its most important union comes as 3,000 delegates and union members are gathered this week for the UAW’s quadrennial constitutional convention – and to elect a new slate of officers that has been shaped by the abrupt retirements of two would-be officers amid the ongoing federal probe.
The allegation is the latest development in a widening federal investigation that has led to criminal charges againstseven people, caused upheaval at the top ranks of the auto industry and raised questions about the sanctity of labor negotiations.
The allegation emerged in court documents filed as part of a plea agreement for former Fiat Chrysler executive Michael Brown, 60, of West Bloomfield Township, who helped run the training center, knew about the conspiracy and that Iacobelli and at least four other unnamed Fiat Chrysler officials were funneling more than $1.5 million worth of illegal payments to UAW officials, prosecutors allege.
"Michael Brown knew that the purpose of the conspiracy to provide prohibited payments to UAW officials was to grease the skids in order to obtain benefits, advantages and concessions in the negotiation, implementation and administration of the collective bargaining agreements between FCA and the UAW," prosecutors wrote in the federal court filing.
The conspiracy described by prosecutors spanned three administrations at the UAW: Presidents Ron Gettelfinger, Bob King and Dennis Williams, who will retire this week during the union's convention at Cobo Center.
The allegation emerged almost one year into a prosecution that has led to six convictions, including former Fiat Chrysler Vice President Alphons Iacobelli. The case has revealed a cozy relationship between the automaker and the union, long-time adversaries, who prosecutors allege forged a relationship designed to corrupt the bargaining process and implementation of a labor contract for thousands of workers.
"Will this go any higher in the union or the company is the question left dangling here," Henning said. "For union members, they will be especially perturbed by this, that the union colluded with the company."
Some of the illegal benefits previously detailed by prosecutors include a $365,000 Ferrari that Iacobelli purchased with money meant for the training center and two bejeweled Montblanc fountain pens that cost $35,700 each.
Other illegal payments included more than $435,000 to a company controlled by the late UAW Vice President General Holiefield and his widow, Monica Morgan-Holiefield; $262,000 to pay off Holiefield's mortgage and more than $30,000 in flights for Morgan-Holiefield to Miami, Las Vegas and Los Angeles, according to prosecutors. The expenses, paid for by the jointly-operated UAW-Chrysler National Training Center, used money provided by the automaker, the government says.
More than $30,000 was spent throwing a party in August 2014 for former UAW Vice President Norwood Jewell, The News has learned. The party included "ultra premium" liquor, strolling models who lit labor leaders’ cigars and a $3,000 tab for wine in bottles with custom labels that featured Jewell’s name.
Jewell, 60, of Davison, has not been charged with a crime during the ongoing investigation.
More illegal payments bankrolled private accommodations, golf resort fees and lavish meals in Palm Springs, Calif., for Jewell and his top administrative assistant, Nancy Adams Johnson, according to the government. Again, the expenses were paid by the training center with money from Fiat Chrysler.
A UAW spokesman declined comment and referred to Williams' speech at the UAW Constitutional Convention on Monday, Williams tried to distance the union from the corruption described by prosecutors.
"To be clear: those who misallocated or misused training center funds betrayed our trust," Williams told thousands of union members Monday at Cobo Center. "The UAW has zero tolerance for corruption, wrongdoing, at any level of the organization.
"Now, our leadership team had no knowledge of the misconduct — which involved former union members and former auto executives — until it was brought to our attention by the government."
Jewell was linked publicly to the criminal investigation in August, when The News learned he had received a $2,180 shotgun purchased with union training center funds. He announced his surprise retirement in November and remained on the job until January.
“What took place with the people that had been indicted flies in the face of UAW culture," said Harley Shaiken, a professor at the University of California-Berkeley who specializes in labor and the global economy. "The reality is all human organizations are subject to issues of corruption. What’s critical is how the organization responds. And in this case, the UAW has been unambiguous.”
A Fiat Chrysler spokeswoman declined comment Tuesday and referred to previous comments by CEO Sergio Marchionne.
"I join Dennis Williams, the UAW President, in expressing my disgust at the conduct alleged in the indictment which constitutes the most egregious breach of trust by the individuals involved," Marchionne wrote in a letter last year to Fiat Chrysler employees. "This conduct had nothing whatsoever to do with the collective bargaining process, but rather involved two bad actors who apparently saw an opportunity to misappropriate funds entrusted to their control and who, unfortunately, co-opted other individuals to carry out or conceal their activities over a period of several years."
Marchionne has a criminal defense lawyer and has been questioned by federal investigators.
Marchionne was questioned during a private meeting in July 2016 with the U.S. Attorney’s Office in downtown Detroit, sources familiar with the investigation said. The Italian auto executive was escorted to the meeting by his white-collar, criminal defense lawyer, William Jeffress of the Washington, D.C., law firm Baker Botts.
Jeffress is a prominent white-collar defense lawyer who handled post-Watergate legal matters for President Richard Nixon and defended Vice President Dick Cheney’s chief of staff I. Scooter Libby in a high-profile CIA leak trial.
Marchionne, 65, has not been charged with a crime during an ongoing federal grand jury investigation that has expanded in recent months to include training centers funded by all three Detroit automakers.
In November, The News reported that federal agents were interested in retired UAW Vice President Joe Ashton, who abruptly resigned from the board of General Motors Co. in December, and Cindy Estrada, his successor in charge of the union’s GM department, who is up for re-election Wednesday.
The alleged conspiracy involving the UAW and Fiat Chrysler could end in a settlement with the government that would require new internal controls, fines or an injunction, Henning said.
"There could be some kind of admission that they failed to oversee what was being done at the training center," Henning said. "Or there could be an agreement to undertake certain measures to make sure this doesn't happen again."
Federal oversight of the UAW could be unprecedented for a union long considered a “clean union” – but not for organized labor. In 1988, the Justice Department sued the International Brotherhood of Teamsters, charging it with labor racketeering in a bid to stamp out corruption and Mafia influence at the union’s highest levels. Prosecutors have not taken any of those steps with the UAW.
A fight for money central to the criminal case involving the UAW and Fiat Chrysler has intensified in recent days. The UAW-Chrysler National Training Center sued Iacobelli and others Friday to recoup $4.4 million it claims was embezzled during the scheme.
During the time of the conspiracy described by prosecutors, Fiat Chrysler executives authorized Holiefield and other UAW officials to offer sham employment at the training center to friends, relatives and allies, according to the court filing.
At the direction of Holiefield and other UAW officials, "numerous individuals were categorized as being on 'special assignment' status to the (training center) when, in fact, those individuals did little work or no work on behalf of the (training center)," prosecutors wrote.
No relatives are identified by name in the court filing.
Two of Jewell's sons are servicing representatives with the union, according to the UAW's annual filings. Justin Jewell is paid $125,744 while Derik Jewell's total compensation is $116,726.
Allegations of nepotism are not limited to the UAW-Chrysler training center. GM and the UAW operate the Center for Human Resources training center in Detroit. So many relatives of UAW officials have worked there that some dub the facility the "Center for Hidden Relatives."
Details about nepotism within the UAW training centers emerged in 2015 when former Center for Human Resources receptionist Shannan McDonald , unsuccessfully sued the training center. McDonald claimed she was forced to resign after being discriminated against due to a disability.
Estrada was deposed in April 2016.
“Ms. Estrada, do you have a daughter or step-daughter named Tara?” McDonald’s lawyer Jeffrey Burg asked during the deposition.
“Tara White,” Estrada said.
“What is she to you?” the lawyer asked.
“She’s my step-daughter,” Estrada said.
“And is Tara White working for (the training center) now?” the lawyer said.
“Yes, she is,” Estrada said.
“Is she working the receptionist job that Shannan had occupied before Shannan left?” the lawyer asked.
“Yes,” Estrada said.
Days earlier, the lawyer deposed John Ashton, a facility manager at the UAW-GM Center for Human Resources.
“Who is Joe Ashton?” the lawyer asked.
“He's my uncle,” John Ashton said.
“And did your uncle Joe Ashton assist in any way in getting you the job at (the training center)?” Burg asked.
“Yes,” John Ashton said.