Retired United Auto Workers Vice President Joe Ashton resigned from General Motors Co.’s board of directors Wednesday, weeks after being linked to a federal grand jury investigation into auto industry corruption.
Ashton’s abrupt departure came six weeks after The Detroit News reported that he had drawn the scrutiny of federal agents looking into potential corruption at UAW joint training centers funded by all three automakers. The investigation focuses on whether training funds were misappropriated, and if labor leaders at GM and Ford Motor Co. received money or benefits through their tax-exempt nonprofits — an allegation that emerged this summer involving Fiat Chrysler Automobiles NV and General Holiefield, a former UAW vice president who died in 2015, sources said.
Ashton, who represents the union’s health care trust on GM’s board, is resigning amid a separate internal investigation GM launched this fall after learning of the widening federal investigation. Sources told The News that GM’s internal review is being conducted by Jones Day, the global law firm that represented Detroit during the city’s landmark bankruptcy.
“Boards are very sensitive bodies, especially for public companies,” David Cole, chairman emeritus of the Ann Arbor-based Center for Automotive Research, said in an interview. “A couple of people (in the industry) have been impacted already, but you don’t know how far that web is going to go. Any hint of impropriety is just not good at all. That would absolutely be a reason for someone to leave a board.”
Ashton is one of GM’s 10 outside directors. After retiring as head of the UAW’s GM department in 2014, he was nominated to represent the union’s Retiree Medical Benefits Trust on GM’s board. The trust’s stake in GM, acquired as part of GM’s bankruptcy, totals 9.3 percent of the automaker’s outstanding shares, according to GM’s latest proxy statement. It is unclear whether a replacement would be appointed to represent the union trust.
The federal probe is the second criminal investigation involving GM in recent years. Under a so-called “deferred prosecution agreement,” the automaker remains under federal oversight following a scandal involving faulty ignition switches that have been linked to almost 400 deaths and injuries.
Under the agreement, GM needs to cooperate with federal prosecutors and report any wrongdoing, an obligation that explains why the Detroit automaker is conducting an internal investigation that is expected to be shared with federal prosecutors.
“That puts a premium on identifying individuals in the company who can be exposed to prosecution, maybe that’s what’s happening,” said Peter Henning, a Wayne State University law professor and former federal prosecutor. “Justice Department policy for prosecuting companies is if they want credit for cooperating, they have to give prosecutors the individuals involved.”
The combination of a grand jury investigation and GM’s internal probe leaves anyone embroiled in the probes in a “vice grip,” Henning added. The scope of GM’s internal review is unclear. But such investigations typically involve reviewing a significant amount of documents, conducting interviews and employing outside experts, if necessary.
Earlier this year, Jones Day conducted another high-profile review of Michigan State University’s football program following allegations of sexual assault involving three players. A Jones Day spokesman did not respond to a message seeking comment about the GM investigation.
In a four-sentence statement, the automaker said Ashton, 69, of Ocean View, N.J., who joined GM’s board in August 2014, “elected to resign.” In a short note, Ashton told GM of his plan to resign immediately from its board, according to a source familiar with the situation.
“This FBI investigation has been a pretty ugly situation for the UAW,” said Michelle Krebs, a senior analyst with Cox Automotive. “It’s unfortunate, because it’s important for there to be a UAW representative at the board level. The UAW fought for years for that, and I think it brings value. What will be interesting to see will be whether they replace him with someone who is also from the UAW.”
A union spokesman declined comment.
Federal investigators are interested in Ashton and Cindy Estrada, his successor in charge of the union’s GM department, according to sources familiar with the investigation. Ashton 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.
Spurred by corruption charges filed last summer against a former Fiat Chrysler Automobiles NV labor executive and the wife of a deceased union vice president, investigators have issued subpoenas 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.
Ashton’s resignation comes roughly five months after Fiat Chrysler labor negotiator Alphons Iacobelli and Holiefield’s widow, Monica Morgan-Holiefield, were indicted and accused of violating the Labor Management Relations Act. They are accused of participating in a $4.5 million scheme that siphoned corporate training funds earmarked for blue-collar workers.
According to an indictment, the payments included designer clothing, jewelry, furniture and $262,219 to pay off a mortgage on the Holiefields’ home. The payments were made using the UAW-Chrysler training center’s credit cards and bank accounts. Holiefield and his wife received more than $1.2 million, prosecutors allege.
Iacobelli, 58, siphoned more than $1 million in training center funds and spent the money on a $365,000 Ferrari, two $35,700 fountain pens, a pool, outdoor kitchen and spa at his Rochester Hills mansion, according to the indictment. The federal investigation dates at least to 2015 and involves FBI, Internal Revenue Service and Labor Department agents.
Ashton’s resignation is the latest departure for an auto industry figure entangled in the corruption scandal. Last month, the UAW announced that Norwood Jewell, head of the Fiat Chrysler Automobiles NV department, would retire Jan. 1, roughly six months before his current term is scheduled to end.
Jewell’s name emerged in August when The News reported he received a $2,180 shotgun purchased with training center funds. The shotgun was part of a broader review by federal agents of questionable spending by UAW leaders, who are accused of using training center credit cards to buy designer purses and $1,000 shoes.
The union vice president received the shotgun as a birthday present in 2015 after the firearm was purchased with funds earmarked for blue-collar workers, according to sources familiar with the investigation. He later reimbursed UAW-Chrysler training center and has not been charged with a crime amid the continuing investigation.
Detroit News auto writers Nora Naughton and Ian Thibodeau contributed.