The broadening federal investigation into the United Auto Workers’ Big Three training centers is no joke.
The union has long enjoyed an institutional reputation mostly free of financial scandal and corruption allegations. Now it faces Justice Department probes of its three Detroit joint training centers, many of its ranking leaders and their charitable non-profits.
Even if the expanded investigation, first reported Thursday by The Detroit News, does not culminate in additional charges, the publicity will underscore a common narrative on factory floors that says the union’s top leaders are more interested in enriching themselves than safeguarding the interests of their members.
The first wave of criminal charges filed against Fiat Chrysler Automobiles NV’s top labor negotiator, Alphons Iacobelli, and the wife of a deceased UAW vice president, Monica Morgan-Holiefield, say as much. They are charged in a scheme that siphoned $4.5 million in corporate training funds earmarked for union members to instead spend on themselves.
The audacity is breathtaking: landscaping and outdoor kitchens, paying off student loans and a home mortgage, buying a Ferrari and plunking down $37,000 for a special-edition Mont Blanc fountain pen — one that an FCA staffer recalls seeing Iacobelli use during a meeting.
This is not the existential crisis the union, which declined comment, faced nearly a decade ago when two of its three automakers collapsed into federally induced bankruptcy. The widening investigation is potentially worse: a crisis of credibility the UAW can ill-afford in a fast-changing auto industry proving resistant to its latest organizing drives.
That’s why union President Dennis Williams, in a letter last July following federal charges against Iacobelli and Morgan-Holiefield, declared himself “appalled” by the conduct detailed in the indictment, adding: “the abuses alleged ... dishonored the union and the values we have upheld for more than 80 years.”
Williams knows his history. As union bargaining after World War II won more benefits for the union’s members and built the foundation of the modern American middle class, legendary President Walter Reuther warned of the temptation implicit in the union’s own managing piles of someone else’s money.
He insisted on professional money managers, if not the automakers themselves, overseeing the vast sums set aside for pensions and health care benefits. He proved prescient, and for decades the UAW avoided institutionalizing the kind of corruption that riddled the International Brotherhood of Teamsters and its pension funds’ ties to organized crime.
Seven years ago, the union revived that strain of Reuther’s prodigious legacy when it adopted the “UAW Ethical Practices Code” at its 35th Constitutional Convention. It barred officers or representatives from accepting “ ‘kickbacks,’ under the table payments, valuable gifts lavish entertainment or any personal payment of any kind ....”
And because the union’s constitution also imposes rigorous and professional financial controls on dues money collected from members, the risk of mismanaging members’ contributions is considered to be negligible.
The training centers, sitting on increasingly valuable downtown real estate, are different. They were formed after passage of the federal Labor-Management Cooperation Act of 1978, a congressional attempt to help American industry better train its workforce to compete with foreign rivals.
The centers are separate corporate entities technically independent of the automakers that fund them according to formulas renegotiated during national contract bargaining. And it’s FCA corporate money that Iacobelli and Morgan-Holiefield are accused of misusing — not dues money collected from members.
General Motors Co. and Ford Motor Co., whose training centers are now part of the expanded investigation, perform annual independent audits on their respective training centers because they are funded with corporate dollars. Until the Iacobelli-Morgan-Holiefield charges last summer, FCA failed to conduct annual audits.
Not anymore. The union and FCA agreed to implement 11 reforms at the joint National Training Center on Jefferson. They include conducting annual independent audits; hiring a full-time controller; subjecting departmental budgets to annual review; formalizing credit card policies; and banning all charitable contributions from the center to “any charity run or controlled by a UAW official.”
Daniel Howes’ column runs Tuesdays, Thursdays and Fridays. Follow him on Twitter @DanielHowes_TDN, listen to his Saturday podcasts, or catch him 3 and 10 p.m. Thursdays on Michigan Radio’s “Stateside,” 91.7 FM.