Detroit — A former labor official told federal prosecutors that United Auto Workers President Dennis Williams directed subordinates to use funds from Detroit’s automakers, funneled through training centers, to pay for union travel, meals and entertainment.
As part of a plea agreement filed Monday, Nancy Adams Johnson told investigators Williams made the directive to relieve pressure on the union’s budget. Williams, the union's president from 2014 until mid-June, and the UAW had no comment on the allegations made by Adams Johnson, the second-highest ranking official in the union’s Fiat Chrysler department.
Money filtered through the training centers for the benefit of UAW officials is at the center of a widening scandal that has led to seven convictions, a shakeup at the highest levels of the auto industry and raised questions about the sanctity of labor negotiations between the union and Detroit's automakers.
"Maybe this is what the senior levels of the UAW were used to, but at its core, this is a significant betrayal of trust," said Peter Henning, a Wayne State University law professor and former federal prosecutor. "This is how a small fraud becomes a much bigger one."
Adams Johnson's plea agreement does not identify the "high-level UAW official" who made the directive. Sources familiar with the investigation told The Detroit News that she identified that official as Williams. They spoke on the condition of anonymity because they were not authorized to speak about the investigation.
Williams has not been charged with any wrongdoing. He is the highest-ranking labor official linked to an investigation that has implicated union leaders and auto executives.
The federal court filing indicates a new path for FBI investigators in a criminal investigation that has spread beyond Fiat Chrysler to General Motors Co. and Ford Motor Co. It suggests company officials gave, and union officials received, gifts in violation of federal laws designed to protect the purity of labor negotiations.
Adams Johnson's guilty plea could have implications for her one-time boss, former UAW Vice President Norwood Jewell. Jewell has previously been linked to a conspiracy involving Fiat Chrysler executives funneling illegal payments and benefits to UAW officials to wring concessions favoring the automaker.
The plea agreement was dated July 18 and signed by Adams Johnson, her lawyer Harold Gurewitz, and two federal prosecutors, including Assistant U.S. Attorney David Gardey, chief of the public corruption unit.
Adams Johnson's lawyer declined comment.
Last month, in his last formal address to members at the UAW's Constitutional Convention in Detroit, Williams tried to distance the union from the scandal.
"To be clear: those who misallocated or misused training center funds betrayed our trust," Williams told thousands of union members gathered in Cobo Center. "The UAW has zero tolerance for corruption, wrongdoing, at any level of this organization."
Williams, who retired last month after a single term as president, could not be reached for comment. He did not respond to messages left with his wife, the UAW, the union's general counsel, Williams' lawyers in Chicago and at the UAW Black Lake Conference Center, a wooded retreat where he has use of a cabin.
UAW spokesman Brian Rothenberg did not directly address the allegation involving Williams, saying: “I cannot comment on speculation from unsubstantiated allegations.”
The conspiracy to use training center funds for improper purposes began by at least January 2009, five years before Williams was elected UAW president, according to federal court records.
The directive described by Adams Johnson stands in contrast to the reported actions of Williams' predecessor as UAW president, Bob King, years earlier.
In 2011, King confronted UAW Vice President General Holiefield and Fiat Chrysler Automobiles NV executive Alphons Iacobelli about the selection of Holiefield’s wife, Monica Morgan-Holiefield, as a vendor for the UAW-Chrysler National Training Center and a nonprofit controlled by Holiefield, according to court records.
“During a face-to-face meeting in Auburn Hills, Michigan, the UAW president warned Holiefield and Iacobelli that paying Monica Morgan was a bad idea and that they could ‘go to jail’ and instructed them not to direct any additional business to Monica Morgan,” according to the indictment charging Iacobelli and Morgan with violating federal labor laws.
Both Iacobelli and Morgan-Holiefield have pleaded guilty for crimes related to the scandal. She was sentenced to 18 months in federal prison on July 13; Iacobelli is awaiting a possible eight-year prison sentence.
In order to circumvent conflict-of-interest rules, Holiefield and his wife asked a friend to create a new company in early 2012 to supply shirts, cups and other trinkets to the training center, the indictment alleges. Holiefield died in March 2015.
Federal prosecutors earlier this year labeled the UAW and Fiat Chrysler as co-conspirators in the scandal, an allegation at odds with claims the labor union and automaker were victimized by rogue employees.
The conspiracy coincided with challenging times for the UAW, according to the government.
The UAW was facing significant financial pressure in 2014 when members approved the first hike in membership dues since 1967, and in 2015, according to Adams Johnson's plea deal. UAW Secretary-Treasurer Gary Casteel reported to members that the union's income for the year ending Dec. 31, 2015, was $207 million, or $42 million less than expenses.
"Sometime in 2014 or 2015, a high-level UAW official directed senior UAW officials to use money supplied by automobile manufacturing companies through joint UAW training centers to pay for travel, including travel solely for purported union business, as well as lavish meal and other entertainment costs of senior UAW officials and their friends, family and allies," according to Adams Johnson's plea agreement. "This directive was issued in order to reduce costs to the UAW budget from such expenditures because the UAW's budget was under pressure."
If senior UAW officials agreed to accept illegal benefits, that amounts to a conspiracy, Henning said: "It's the starting point for fairly serious criminal conduct," he added. "This is how the U.S. Attorney's Office sends a message and says who they're looking at. If you're going to cooperate, it's better to come in now rather than later."
The ongoing investigation has centered on whether automakers sent illegal payments and things of value to UAW officials through joint-operated training centers that are supposed to benefit blue-collar workers, potentially influencing collective bargaining. The centers are funded by Detroit's automakers.
From 2014 to 2016, the UAW-Chrysler National Training Center's credit cards bankrolled expensive meals, golfing, hotel suites, limousines and condominium expenses for high-level UAW officials in Palm Springs, California, according to the government.
Simultaneously, Fiat Chrysler officials filtered money through the training center to pay the salaries of "a large number of" UAW officials and employees who supposedly were assigned to work at the training center, the government alleges.
"(Fiat Chrysler) paid these salaries for the UAW even though senior UAW officials and (Fiat Chrysler) executives both knew that these UAW officials and employees 'assigned' to the (training center) spent most of their work time performing tasks for the UAW . . ." the government alleged.
Jewell, the former head of the union’s Fiat Chrysler department, is one UAW vice president who benefited from a cozy relationship between the automaker and the union, according to the government.
Iacobelli, Fiat Chrysler's top labor negotiator, approved spending more than $30,000 in worker training funds on a party for Jewell in August 2014, a bash that included “ultra-premium” liquor and strolling models who lit labor leaders’ cigars, according to court records.
The training funds covered the $7,000 cigar purchase and a $3,000 tab for wine in bottles with custom labels that featured Jewell’s name, sources told The News.
Prosecutors raided his home in November during the investigation, which has previously revealed that Jewell received a $2,180 shotgun purchased with training center funds. The UAW said that Jewell didn’t know the shotgun was purchased with training center money and later reimbursed the money spent on the firearm.
Jewell has not been charged with a crime. Prosecutors applied new pressure Monday when Adams Johnson, Jewell's top administrative assistant, agreed to cooperate with the ongoing investigation.
Late last year, The News revealed federal agents were 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.
Since that disclosure, Ashton resigned from GM's board and Estrada last month was transferred to replace Jewell as head of the UAW's Fiat Chrysler department. Neither Ashton nor Estrada have been charged with a crime.