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U.S. corruption probe involving lavish parties, champagne hits another top UAW official
By Nick Carey and David Shepardson
Just two days before the UAW's contracts with Detroit automakers were due to expire, U.S. prosecutors arrested and charged a senior union official on Thursday with embezzlement, releasing a complaint that alleges he spent member dues on lavish parties for union leaders, with liquor, cigars and women to light them.
Negotiators from the United Auto Workers already faced contentious talks with General Motors Co, Ford Motor Co and Fiat Chrysler Automobiles NV (FCA), focusing on thorny issues like healthcare costs and profit-sharing at a time when U.S. new vehicle sales are declining.
But Saturday's deadline could be overshadowed by the latest revelations in a mushrooming corruption scandal, of vast sums being spent on lavish entertainment by labor leaders - including $440 bottles of champagne originally created to please a Russian czar and scantily clad women to light union leaders' cigars.
The union had hoped to put the federal probe behind it by electing Gary Jones, a former regional director for the union, as president in 2018. He was chosen as he seemed far removed from the scandal.
But Vance Pearson, 58, served as Jones' second in command from 2016 to 2018 and replaced him last year as director of the UAW's so-called "Region 5," which covers 17 western and southwestern U.S. states.
Pearson's arrest comes just two weeks after the FBI conducted searches including at Jones' home, as part of an ongoing corruption probe into illegal payments to union officials.
Jones has not been charged with any wrongdoing. A lawyer for Jones did not immediately respond to a request for comment.
Adding to intrigue, the complaint makes frequent reference to someone identified only as "UAW Official A," saying government agents had seized $30,000 in cash from the individual's residence.
Steven Bernstein, a Tampa-based labor attorney at Fisher Phillips LLP, said the latest charges create a "difficult dynamic" for the union in talks with automakers.
"This does have the potential to compromise whatever leverage the union's leaders think they have," he said.
In a statement, the UAW said "we strongly believe that the government has misconstrued any number of facts and emphasize that these are merely allegations, not proof of wrongdoing."
Last week, the UAW said it would target GM first out of the Detroit automakers for focused contract talks.
GM said in a statement it was "outraged and deeply concerned" by the revelations.
"These serious allegations represent a stunning abuse of power and trust," the company said.
The widening probe raises questions about whether the U.S. government might seek to take over the UAW. Peter Henning, a Wayne State University law professor and former federal prosecutor, said a UAW takeover would be “the nuclear option."
In 1988, the Justice Department sued to force out senior leaders at the International Brotherhood of Teamsters union and appoint a trustee because of the union's connection to organized crime. The government oversaw the union from March 1989 until 2015 when it agreed to a five-year transition period that will end in February 2020.
CRISTAL CHAMPAGNE FOR $1,760
The complaint said between 2014 and 2018 Pearson and other leading UAW officials had submitted "fraudulent expense forms."
Much of the complaint centers on conferences held by the UAW's Region 5 in Palm Springs, California. The allegations include that, through a "master account" set up at a Palm Springs hotel, union officials embezzled more than $600,000 spent on lavish living for weeks or months at a time. Agents had also found similar payments from accounts at two other hotels.
The complaint singles out a dinner at a local restaurant on New Year's Eve 2016 that cost $6,600, including four bottles of Louis Roederer Cristal champagne for a total of $1,760.
The complaint quotes from the Louis Roederer website that the Cristal was "created in 1876 to satisfy the demanding tastes of (Russian) Tsar Alexander II," who was assassinated by a revolutionary in 1881.
Harley Shaiken, a labor expert at the University of California-Berkeley, said the news could be a distraction for negotiators, but the union and its members are focused on a new contract.
"UAW members are focused on how a deal will affect them," he said. "But even a small number of angry members could color a ratification vote on a contract."
The ongoing scandal also affects a labor organization closely allied with Democrats a little over a year away from a U.S. presidential election. The UAW represents tens of thousands of workers in the battleground states of Ohio and Michigan.
To date, nine people have pleaded guilty in connection with the ongoing investigation into illegal payoffs to UAW officials by FCA executives and corruption within the UAW.
Last week, former UAW official Michael Grimes pleaded guilty to wire fraud and money laundering. Grimes was an official in the union's GM department until retiring in 2018.
46,000 UAW workers go on strike against General Motors
By Chris Isidore, CNN Business | Mon September 16, 2019
By Chris Isidore, CNN Business | Mon September 16, 2019
https://amp.cnn.com/cnn/2019/09/16/business/uaw-gm-strike-general-motors/index.htmlThe United Auto Workers union went out on strike against General Motors Sunday night, the first work stoppage in the US auto industry in 12 years.
The union's 46,000 hourly workers walked out at 31 GM factories and 21 other facilities, spread across nine states, mostly in the center of the country. It's the largest strike by any union against any business since the last strike at GM in 2007.
The strike started at 11:59 pm Sunday night. The two sides did not formally meet Sunday after the union declared its intention to strike at a morning press conference, although union spokesman Brian Rothenberg said that the dialogue between the two sides was ongoing. A new meeting of the two sides is set for 10 a.m. Monday.
The union said that GM was putting profits ahead of employees who helped to turn the company around when it went through bankruptcy and federal bailout a decade ago.
The company said it made a substantial offer that includes improved pay and profit sharing for union members, along with investment to bring new jobs. It also promised a "solution" for two of the four plants currently slated for closure: one in Detroit and another in Lordstown, Ohio.
The company did not say what the solution would be. But a person familiar with GM's offer said it included a promise to build a new electric truck at Detroit Hamtramck, and to build new batteries for electric vehicles in Lordstown. That work wouldn't start immediately, so the plants would likely remain dark for some time. Work would start sometime in the next four years if the offer is accepted.
A source close to the UAW with direct knowledge of negotiations said most of the proposals the company disclosed publicly on Sunday came very late in negotiations Saturday.
GM announced plans in November of 2018 to shut the Detroit and Lordstown assembly plants, along with transmission plants in Baltimore and Warren, Michigan.
The UAW has vowed that keeping the plants open would be a key bargaining demand. Late Saturday it said while there had been progress in the talks there was still "significant differences between the parties on wages, health care benefits, temporary employees, job security and profit sharing."
GM says its average hourly employee earns about $90,000 per year, not including benefits. But the number of hourly workers at GM has declined sharply in recent decades, due to a combination of automation, lost market share and outsourcing. But GM still builds the overwhelming majority of cars it sells in the US market in North America. And it has far more factories in the United States than it does in Mexico or Canada.
The union had earlier extended the contracts at two other US automakers with UAW contracts, Ford (F) and Fiat Chrysler (FCAU), as it targeted GM in an effort to reach a deal that would set a pattern for the industry. The union announced late Saturday while membership would work past the original 12:01 a.m. ET contract expiration early Sunday, there would be no long-term extension of the contract at GM if the two sides did not reach a deal on Sunday.
All three automakers are dealing with slower sales and the need to make huge multi-billion-dollar investments in developing electric and self-driving vehicles that have more long-term potential than current market demand.
It was the need to save money for those efforts that GM halted operations at three US plants — including the assembly line in Lordstown, and announced plans to shut the Hamtramck plant, its last Detroit factory, early next year.
But negotiations come as the union is hit by a scandal involving misappropriation of union funds, and in some cases, union officials accepting bribes from officials at Fiat Chrysler. Nine people associated with the union or Fiat Chrysler have already pleaded guilty to federal charges.
Last week, the Detroit News reported the union's president, Gary Jones, was the unnamed union official identified in the most recent indictment as "UAW Official A." The union has not responded to a request for comment about that report.
Experts say the scandal will make it more difficult to get rank and file union members at the automakers to ratify any tentative deal reached by union leadership. Four years ago the deals all passed by only narrow margins, even though there was no scandal at that time.
The last strike 12 years ago lasted only three days, but some strikes against GM in the past have stretched on for months. For many of the employees hired since 2007, this is their first work stoppage.
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