Gary Jones’ tenure as head of the United Auto Workers was brief. But he and the union are preparing for what may be a long ordeal. On November 20, Jones, beset by a slew of federal corruption charges involving millions of dollars in illegal payoffs exacted from vendors by ex-officials of the UAW’s General Motors Department, abruptly resigned as president. Nine days later, he ended his union membership. The actions occurred shortly after the UAW executive board filed paperwork to expel him and a regional director, Vance Pearson. While Jones has not been accused of anything (yet), his home was one of several sites raided in August by federal agents. In a related event, GM last month filed a racketeering suit against Fiat Chrysler on grounds that the latter misused the collective bargaining process to facilitate a merger.
In normal times, the 400,000-member, Detroit-based United Auto Workers might be celebrating right now. After months of talks, the union has reached final approval on a new four-year contract with Ford and General Motors, and tentative approval with Chrysler. In the case of GM, the affirmative ratification vote on October 25 came after a 40-day strike. Yet these are not normal times. The union for the last couple years has been enmeshed in scandal. Four union officials, the wife of a deceased union official, and three former Chrysler executives each have been convicted and sentenced on a variety of charges related to the use of an estimated $4.5 million in funds from the company-funded National Training Center for personal gain. That scandal broke wide open in July 2017, as Union Corruption Update reported shortly thereafter, and still might have life.
Now the union’s General Motors Department is feeling the sting of scandal. On September 4, Michael Grimes, former administrative assistant to UAW Vice President Cindy Estrada, pleaded guilty to honest services fraud and money laundering for participation in a conspiracy with two former officials of the union’s GM Department to extract about $2 million in bribes and kickbacks from vendors of union-logo merchandise, $1.5 million of which he kept for himself. The co-conspirators were Vance Pearson, director for the Hazelwood, Mo.-based UAW Region 5 and a member of the union’s International Executive Board, and Jeffrey Pietrzyk, a retired top aide to ex-UAW President Joe Ashton. Pearson was arrested and charged on September 12 with fraud, embezzlement and money laundering related to various schemes that skimmed hundreds of thousands of dollars in UAW funds for travel, entertainment and other personal expenses unrelated to union business. Pietrzyk pleaded guilty on October 22 to honest services fraud and money-laundering related to his acceptance of nearly $125,000 in bribes and kickbacks from union vendors.
The web of prosecution since has widened. On October 31, Edward “Nick” Robinson, president of the Hazelwood, Mo.-based United Auto Workers Midwest CAP (Community Action Program) Council, was charged in separate information counts in U.S. District Court for the Eastern District of Michigan of embezzlement of around $1.5 million in union funds following a joint FBI, IRS and Labor Department probe. From 2010 until about September of this year, say prosecutors, Robinson submitted fraudulent expense vouchers to the UAW and wrote unauthorized checks to divert funds from the CAP council. In addition, he allegedly failed to report over $1.5 million in income on IRS Form 990 tax returns. More ominously, Robinson allegedly split large portions of the phony reimbursements with two persons identified as “UAW Official A” and “UAW Official B.” Sources close to the investigation have indicated that these individuals, respectively, are recently-departed UAW President Gary Jones and his immediate predecessor, Dennis Williams. Robinson and his alleged co-conspirators reportedly spent the embezzled funds on indulgences such as private villas, cigars, liquor, restaurant meals and golf outings.
Several days later, on November 6, former UAW Vice President Joseph Ashton, who for several years also had served as director of the UAW-GM training facility, the Center for Human Resources (CHR), was charged in information counts in U.S. District Court for the Eastern District of Michigan with conspiracy to commit honest services fraud and conspiracy to commit money laundering. According to prosecutors, Ashton, earlier named as an unindicted co-conspirator, participated in a scheme through which UAW and CHR officials personally enriched themselves by pressuring a union vendor into providing a $250,000 loan in return for being awarded a contract worth almost $4 million. After the vendor won the contract, Ashton allegedly demanded at least $250,000 in kickbacks. The evidence was overwhelming. And today, just hours ago, he pleaded guilty to both charges.
The grip had been tightening around UAW President Gary Jones for months. FBI agents in late August raided his Canton Township, Mich. home, discovering $30,000 in cash and other things of value in the garage, such as expensive liquor and golf equipment. The panic escalated in September with the charges against Vance Pearson, who had been Jones’ successor as director of Region 5. It escalated even further with the October 31 charges filed against Nick Robinson. According to prosecutors, Robinson had met with Pearson and “UAW official A” (Jones) to discuss the following: a job for one of Robinson’s relatives; the need to use “burner” phones to evade federal electronic surveillance; and the need to destroy potentially incriminating evidence. Charging documents indicate that Robinson embezzled as much as $700,000 in member dues and split the money with Jones in the form of cash. Jones in turn allegedly deposited $93,000 of that sum into a personal bank account.
The news went from bad to worse when Pearson on November 24 resigned both his post and union membership. He didn’t have much choice by then, as the union was about to remove him. Gary Jones, though not charged, saw the handwriting on the wall. Having already taken a paid leave of absence on November 2 following the release of possibly incriminating secret recordings, he officially resigned on November 20. “Jones had faced internal UAW Article 30 charges that would have removed him from office and from his membership,” said UAW spokesman Brian Rothenberg in a prepared statement. “He had previously resigned his office as president.”
President Jones’ New York-based lawyer, Bruce Maffeo, has a different account of things. His decision to exit, said Maffeo, was rooted in genuine concern for the well-being of UAW members and their families. Moreover, he asserted, Jones decided to step down before learning of the union’s intent to oust him. But this may be public relations spin. By resigning, Jones avoided a trial in accordance with Article 30 of UAW by-laws. “Vance Pearson was close with Gary Jones,” remarked University of California at Berkeley labor specialist Harley Shaiken. “Resigning from the union preemptively? Not a positive sign.” Marick Masters, a professor of business at Wayne State University in Detroit, likewise sees Jones’ disengagement from the UAW as an act of desperation. “I think it means he is trying to avoid any possible penalties the union might impose on him,” said Masters. Jones, for decades a UAW member prior to his election as president in June 2018, has avoided the humiliation of being kicked out of the union, but he will have a rough time avoiding the federal dragnet. If Vance Pearson and Nick Robinson take their cases to trial and testify against Jones in return for lighter sentences, it might be game over for Jones.
In the meantime, Acting UAW President (and immediate past Vice President) Rory Gamble, who ascended to his present job on November 3 following Jones’ announcement of a leave of absence, two days ago vowed to create “a financially safeguarded union.” Likewise two days ago United Auto Workers Secretary-Treasurer Ray Curry announced the replacement of the union’s previous accounting firm with the Bethesda, Md.-based Calibre CPA Group to conduct internal audits. Calibre, which specializes in union accounts, will be aided by the Deloitte accounting firm. “This top-to-bottom assessment of our financial and accounting procedures and policies will result in a stronger and more stringent financial oversight of all expenditures,” said Curry.
U.S. Attorney Matthew Schneider, who is heading the investigation, is less optimistic. He believes the union deliberately withheld key information from prosecutors in its Article 30 filing. Schneider emphasized that if the union doesn’t fully cooperate, his office would consider a takeover. The UAW’s Rothenberg vows full compliance. “The UAW has, as recently as last week, expressed a willingness to further work with the government on the issues of concern,” he stated. “And we continue to cooperate in providing the government any and all records requested.”
As a coda to all this, General Motors and Fiat Chrysler Automobiles are squaring off as a direct consequence of UAW corruption. On November 20, the day of Jones’ resignation, GM announced it had filed a federal racketeering suit against Chrysler and its former executives who pleaded guilty in the Chrysler-UAW scandal. The suit alleges that FCA’s late CEO Sergio Marchionne orchestrated a conspiracy to force a merger with GM. “This lawsuit is intended to hold FCA accountable for the harm its actions have caused our company and to ensure a level playing field going forward,” said Craig Glidden, GM Executive Vice President and General Counsel. The “harm” in question relates to “FCA’s manipulation of the collective bargaining process” during contract talks in 2011 and 2015. The suit claims that Marchionne, who died unexpectedly in July 2018, authorized bribes to now-deceased UAW Vice President General Holiefield in order to raise GM’s labor costs to the point of inducing a merger. Chrysler is calling the allegation “nothing more than a meritless attempt to divert attention from that company’s own challenges.” In the auto industry, the interests of management and labor uncomfortably overlap.