When it comes to self-dealing, the United Auto Workers’ General Motors Department might rival its Chrysler Department. On September 4, Michael Grimes (in photo), a now-retired senior UAW official, pleaded guilty in U.S. District Court for the Eastern District of Michigan to honest services fraud and money laundering in connection with his receipt of over $1.5 million in illegal payoffs from UAW vendors over a dozen years. Eight days later, on September 12, a prominent union regional official, Vance Pearson, was arrested and charged with fraud, embezzlement and money laundering connected to separate schemes. The actions follow a joint investigation by the FBI, the IRS and the U.S. Labor Department’s Office of Labor-Management Standards and Office of Inspector General.
Union Corruption Update described the case of Michael Grimes a few weeks ago. Grimes, now 65 and living in Fort Myers, Fla., had served as a $150,000-a-year administrative assistant to United Auto Workers Vice President Cindy Estrada. According to federal prosecutors, during 2006-18 he conspired with two unnamed officials in the union’s General Motors Department to extract nearly $2 million in bribes and kickbacks from union vendors, about $1.5 million of which he kept for himself. The vendors had contracts with the union-GM training center to produce UAW-logo clothing and sundry items. Grimes went to great lengths to retain these contracts, on several occasions threatening vendors with cancellation of contracts if they didn’t provide kickbacks. Among the accusations, during November 2010-October 2017 he received about $900,000 in payments logged as “consulting fees” and then laundered the money through a sham company, KKG Consulting, controlled by his wife or other family members. And in 2016, he received a $500,000 kickback from a vendor as part of a $5.8 million contract to provide backpacks for union members. Grimes initially pleaded not guilty to all charges, but changed his mind soon enough.
There is more to this story, however. Grimes became a target of an investigation following raids by federal agents of top United Auto Workers officials in several states. In late August, FBI agents conducted searches of the Canton, Mich. home of current UAW President Gary Jones and the Corona, Calif. home of immediate past UAW President Dennis Williams, each suspected of participating in or condoning illegal union dealings with General Motors. There is good reason to believe that they know more than they are letting on. The feds also raided the union’s Black Lake retreat in northern Michigan, the Janesville, Wisc. home of ex-President Williams’ administrative assistant Amy Loasching, the office of a UAW local in suburban St. Louis, and the St. Charles, Missouri home of a prominent union official. Those last two targets related to Vance Pearson, who was arrested on September 12 after being charged with conspiring with unnamed persons to embezzle, defraud and launder hundreds of thousands of dollars.
Pearson, now 58, is a leading figure of the United Auto Workers. He is director of UAW Region 5, based in Hazelwood, Mo. and also a member of the union’s International Executive Board. According to federal investigators, he’s also a crook. Between 2014 and 2018 he and other union officials submitted fraudulent requests to Detroit headquarters for reimbursement for expenses incurred during leadership and training conferences. These conferences appear to have been efforts to conceal lavish spending on travel, lodging and other activities unrelated to union business. Pearson and other senior UAW officials used union funds to buy golf-related equipment and accessories at various pro golf shops in California and Missouri. He and his co-conspirators also allegedly spent tens of thousands of union dollars on green fees at the Indian Canyons golf course in Palm Springs outside of scheduled time frames of Region 5 conferences. Pearson apparently also had a thing for cigars. Prosecutors allege that he and other individuals embezzled more than $60,000 in UAW funds for the purchase of cigars, humidors, cigar-cutting equipment and lighters. Like the golf trips, these expenditures were listed under “conferences.”
Federal officials are touting these latest actions as evidence that the UAW is overdue for reform. “The hard-working members of the UAW deserve to be represented by leaders who give them true leadership – and that means leadership that isn’t driven by corruption and greed,” said U.S. Attorney Matthew Schneider following Grimes’ guilty plea. Irene Lindow, Special Agent-in-Charge, Chicago Region, for the U.S. Department of Labor’s Office of Inspector General, had this to say: “Michael Grimes abused his former fiduciary position as an International United Auto Workers official by demanding and accepting over $1.5 million in kickbacks from vendors. Grimes chose greed over bargaining in the best interest of UAW members to personally enrich himself.”
These developments should be seen in the context of a UAW strike against General Motors that began on September 15. Nearly 50,000 U.S. and Canadian workers, many of them having made wage and benefit concessions as part of the Obama administration GM bailout in 2009, are demanding more profit-sharing and job security, and a reversal of previously announced plant closings. The strikers are especially angry over the possibility that GM may reduce combined wage and benefit compensation from the current average of $63 an hour to the roughly $50 an hour offered by foreign-based automakers. This is part of a long-term effort led by Chairwoman and CEO Mary Barra to retool GM as a leader in electric and self-driving car production. General Motors has become quite profitable since declaring bankruptcy a decade ago; adjusted profit for each of the last three years has been around $12 billion. Dues-paying UAW rank and file may see GM as a villain, but they would do well to shift some of their indignation toward their leaders’ financial abuse.