Detroit — Fiat Chrysler Automobiles NV CEO Sergio Marchionne has a criminal defense lawyer and has been questioned by federal investigators about a $4.5 million corruption scandal involving the automaker’s training center, The Detroit News has learned.
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.
Marchionne, 65, has not been charged with a crime during an ongoing federal grand jury investigation that has expanded in recent weeks to include a member of General Motors Co.’s board and United Auto Workers training centers funded by all three Detroit automakers.
The scandal emerged publicly in July. That is when former Fiat Chrysler Vice President Alphons Iacobelli was indicted and accused of funneling kickbacks to UAW officials.
“If a subordinate is charged with a crime ... you ought to be concerned,” said Peter Henning, a Wayne State University law professor and former federal prosecutor. “This doesn’t mean (Marchionne’s) done anything wrong. This is a process that is fraught with great risk so you want good counsel to guide you through it and see if you have any criminal exposure.”
Jeffress, 72, 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. Libby was convicted in 2007 of lying to authorities and obstructing the investigation into the leak of a CIA operative’s identity, but President George W. Bush commuted his 30-month prison sentence.
Jeffress declined comment.
MORE ABOUT THE CASE:Former FCA exec, wife of former UAW VP indicted (July 26, 2017)
It is unclear what Marchionne told prosecutors during the meeting but he appeared voluntarily and was not subpoenaed, The News has learned. Also unclear is whether Marchionne reached an agreement that would grant him limited immunity before talking to prosecutors.
“That’s the key,” Henning said, emphasizing the meeting is not unusual.
“Fiat Chrysler has to appear cooperative,” Henning said. “No one wants to start yelling ‘Fifth Amendment.’ That sends a signal to the government that there’s at least smoke, and maybe fire.”
One year after the July 2016 meeting, Iacobelli was indicted.
Fiat Chrysler provided Marchionne with the lawyer and is paying Jeffress’ bills amid a years-long investigation involving federal agents from the FBI, Internal Revenue Service and U.S. Labor Department.
“This is going to be expensive,” Henning said.
Fiat Chrysler also has provided lawyers for other executives questioned during the investigation. That list of executives includes Iacobelli’s supervisor at the time, Michael Keegan. He headed human resources for FCA North America until being named head of the automaker’s global communications in August.
“This is customary to hire attorneys for employees and executives that are interviewed as part of a government investigation,” a Fiat Chrysler spokesman told The News on Friday.
Jeffress has ties to the auto industry and experience in federal court in Detroit. In 2006, he defended former Delphi CEO J. T. Battenberg after the U.S. Securities and Exchange Commission accused the executive and others of participating in or aiding and abetting a fraudulent accounting scheme before the parts supplier filed bankruptcy in 2005. The case ended with Battenberg paying a $215,000 penalty.
Iacobelli, meanwhile, was indicted alongside Monica Morgan-Holiefield, widow of former UAW Vice President General Holiefield. The executive and the widow are accused of violating the Labor Management Relations Act and siphoning corporate training funds slated for blue-collar workers.
The criminal investigation was at least a year old by the time Marchionne met with prosecutors. As The News first reported Thursday, investigators have issued subpoenas in recent weeks for information about training centers financed by GM and Ford Motor Co. that are operated jointly with the union, sources familiar with the investigation said.
Investigators are interested in Joe Ashton, a retired UAW vice president appointed to GM’s board in 2014, and Cindy Estrada, his successor in charge of the union’s GM department, according to sources familiar with the investigation. Ashton, 69, of Ocean View, N.J., is the highest-ranking official whose name has surfaced in connection with a criminal investigation into whether money and illegal benefits corrupted the bargaining process.
The investigation focuses on whether training funds were misappropriated, and if labor leaders at GM and Ford received money or benefits through their tax-exempt nonprofits — an allegation that emerged in the case against Iacobelli and Morgan-Holiefield.
The indictment alleges Iacobelli and other UAW-Chrysler training center officials created a liberal spending policy and used training center credit cards and bank accounts to keep senior UAW leaders “fat, dumb and happy.”
According to the indictment, Holiefield used his UAW-Chrysler training center credit card for more than $200,000 in personal purchases, including jewelry, furniture and designer clothing. Training center funds also were used to pay off the $262,220 mortgage on the Holiefields’ home, prosecutors said.
Federal prosecutors may grab former Fiat Chrysler executive Alphons Iacobelli’s $1.3 million mansion in Rochester Hills. They argue the home is tied to fraud and money laundering and could be forfeited to the government.
Meanwhile, Iacobelli, 58, siphoned more than $1 million in training center funds and spent the money on a $365,000 Ferrari 458 Spider convertible, two $35,700 Montblanc fountain pens, a pool, outdoor kitchen and spa at his Rochester Hills mansion, according to the indictment.
Four people have been charged with a crime and two have struck plea deals with the government. They are:
Former Fiat Chrsyler financial analyst Jerome Durden, who prosecutors say helped transfer millions of dollars in training center funds to Holiefield, Morgan-Holiefield and Iacobelli. He faces up to 37 months in prison and is expected to cooperate with prosecutors.
Former UAW official Virdell King admitted misusing funds that were intended to train and retrain blue-collar workers. She faces up to 16 months in prison and is expected to cooperate with the investigation.