Federal probe into union corruption expands to General Motors

A federal investigation into misuse of millions of dollars in training center funds by Fiat Chrysler executives and United Auto Workers leaders has expanded to General Motors.

Michael Grimes, a retired senior official with the union’s GM division, has been charged with wire fraud and money laundering for allegedly receiving $2 million in kickbacks from UAW vendors. He was charged in a criminal information, which indicates a guilty plea is expected.

Grimes’ plea at a hearing Sept. 4 in Ann Arbor would be a major milestone in the Department of Justice investigation into one of America’s largest unions. He is the first person not affiliated with Fiat Chrysler to be charged as part of the multiyear probe.

However, the allegations against Grimes differ from previous ones that led to the convictions of eight company and union officials with Fiat Chrysler.

Prosecutors did not identify any GM executives as being involved in the corruption, as they did with FCA.

There also were no allegations that the actions were meant to impact the UAW’s collective bargaining with GM, as there was with the Italian-American automaker.

In a statement, GM called the alleged conduct of Grimes and other union officials “deeply disturbing” and said it is “fully cooperating” with the investigation.

“These serious allegations represent a stunning abuse of power and trust,” GM said in a statement. “There is no excuse for union officials, entrusted with a fiduciary responsibility to their members and the Center for Human Resources (training center), to enrich themselves at the expense of the union membership they represented — and to steal CHR funds invested by GM for training our hourly employees.”

‘Undermines trust’

The charges come at an inopportune time for the union and the Big Three Detroit automakers, which are negotiating new contracts for 158,000 UAW workers. The expansion of the investigation could make ratifying the contracts more difficult, according to officials.

“This doesn’t appear to have affected the bargaining process in past rounds, but it does cast a shadow over this year’s talks because it undermines trust in leadership,” said Kristin Dziczek, vice president of industry, labor and economics at the Center for Automotive Research in Ann Arbor.

When the federal investigation was made public in July 2017, it focused on a jointly operated training center between the UAW and Fiat Chrysler. But it quickly expanded to probes into similar operations with GM and Ford Motor, which previously confirmed it was cooperating with the investigation. The Detroit training centers are jointly overseen by the companies and union but funded by the automakers as part of their collective bargaining agreements.

The probe has led to the convictions of five people affiliated with the UAW and three Fiat Chrysler executives, including former head of labor relations, Alphons Iacobelli, who was sentenced last year to 5½ years in prison — the longest sentence in the case.

Additional charges coming?

Grimes, who faces up to 20 years in prison, was one of three union officials identified by federal prosecutors as receiving bribes and kickbacks from vendors who were contracted to produce merchandise, internally known as “trinkets and trash,” for the union.

Federal officials, in court documents unsealed Aug. 14, accuse the three union officials of taking or extorting hundreds of thousands of dollars from vendors and using training center funds to benefit themselves.

Grimes’ attorney, Michael P. Manley, did not respond for comment. The DOJ declined to comment on the ongoing investigation.

While the court documents did not name the two other union officials, The Detroit News, citing sources, identified them as being retired UAW Vice President Joe Ashton and one of his top lieutenants, Jeff Pietrzyk.

Ashton — the first UAW leader on GM’s board — resigned from the board in December 2017 after reportedly being linked to the investigation. He has not been charged.

GM declined to comment on the circumstances surrounding his resignation. Ashton did not return a phone message seeking comment. Pietrzyk could not located for comment.

‘Shocking and absolutely disgraceful’

The charges against Grimes, who retired from the union in 2018, give credence to reports that Cindy Estrada, a sitting vice president of the union who succeeded Ashton, was of interest to federal prosecutors. Grimes served as Estrada’s top assistant.

Estrada, who started as a vice president in 2010, has not been charged with any crimes or named in any court filings involving the corruption probe.’

A spokesman for the UAW declined to comment directly on the investigation, referring to a previous statement that Grimes “benefitted only himself, not the UAW membership, and should be fully prosecuted to the extent of the law.”

A separate statement on behalf of the union’s board, which includes Estrada, called Grimes’ alleged actions “shocking and absolutely disgraceful.” It also outlined steps taken last year in an attempt to cease such corruption, including adopting a “strict three-bid process” for vendors of the union and the joint training centers.

CNBC | August 28th, 2019
https://www.cnbc.com/2019/08/27/federal-probe-into-union-corruption-expands-to-general-motors.html