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Detroit — United Auto Workers President Gary Jones is an unnamed union official accused in a federal criminal case Thursday of helping orchestrate a years-long conspiracy that involved embezzling member dues and spending the money on personal luxuries, three sources told The Detroit News.

In the criminal case, federal authorities identified four current and former senior officials as complicit in the embezzlement scheme. The government did not use their names but used labels to identify the union leaders, including “UAW Official A” and “UAW Official B,” and detailed numerous instances of misspending on golf, golf equipment, cigars, months-long rentals at private villas and falsified expense reports.

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Multiple sources told The News that "UAW Official A" is Jones and "UAW Official B" is former President Dennis Williams. The sources spoke only on the condition that they were not publicly identified because they are not authorized to speak about the investigation.

In outlining its case, federal officials provided the most detailed accounting to date of how Jones' former aide, UAW Region 5 Director Vance Pearson, and the unnamed union officials defrauded the union by using fraudulent expense reports for items during prolonged stays in luxury Palm Springs villas. Those visits lasted days, weeks and even months beyond the union's official business purpose for being in the desert oasis.

Pearson made an initial appearance in a Missouri federal court Thursday to face charges that include embezzling union funds, mail and wire fraud and money laundering.

The criminal case outlined a pattern of corruption stretching from California to Detroit and illegal spending by union leaders who spent more than $1 million of member dues on Palm Springs villas, steakhouse dinners, 107 rounds of golf, golf gear, cigars and $400 bottles of Louis Roederer Cristal Champagne.

The criminal charges were unsealed two days before a union contract deadline with General Motors Co., its target company, and Detroit’s other two automakers that is set to expire Saturday night, which could send 46,000 hourly workers to the picket line. The widening criminal investigation, marked by Aug. 28 raids at the homes of Jones and Williams, arguably complicate the most consequential negotiations since the bankruptcies a decade ago of two Detroit automakers.

"It increases the likelihood that the government will come after the union with a RICO charge,” said Erik Gordon, a professor at the University of Michigan’s Ross Business School. “The union cannot defend itself on the basis that there were some renegade bad apples. You’ve got a former president. You’ve got a sitting president. You’ve got the union as a whole that has aggressively defended the sitting president." 

Jones' criminal defense lawyer, Bruce Maffeo, could not be reached for comment Thursday. Neither Jones nor Williams have been charged with wrongdoing.

In a statement, the UAW said that "while these allegations are very concerning, we strongly believe that the government has misconstrued any number of facts and emphasize that these are merely allegations, not proof of wrongdoing. Our highest priority is maintaining the trust and confidence of United Auto Workers members."

A union spokesman declined further comment.

"GM is outraged and deeply concerned by the conduct of union officials as uncovered by the government’s investigation and the expanding charges revealed today," GM said in a statement. "These serious allegations represent a stunning abuse of power and trust. There is no excuse for union officials to enrich themselves at the expense of the union membership they represent."

The criminal case and interviews provide new details about what investigators found during a series of raids by federal agents Aug. 28 in four states, including a search at Jones' home in Canton Township. 

Prosecutors have not named Jones in any federal court filing.

During the search of "UAW Official A's" home, investigators seized more than $30,000 in cash and a set of Titleist golf clubs purchased four years ago with union money, according to a court complaint that includes an affidavit written by Labor Department Special Agent Andrew Donohue.

The money and golf clubs match an eyewitness description from a neighbor who spoke with The News during the Aug. 28 raid. That day, Jones' neighbor, Kevin Telepo, said he saw investigators working in the garage of the house.

"They were on the floor counting cash, going through the wads," said Telepo, 47, who lives five houses down from Jones. "They pulled out a five-foot tube that was a UAW banner. They were really examining the golf clubs."

During the other searches, investigators from the FBI, Internal Revenue Service and Labor Department seized "hundreds of high-end bottles of liquor, hundreds of golf shirts, multiple sets of golf clubs and a large quantity of cigars," according to the government.

The federal affidavit details a years-long conspiracy involving Region 5's Pearson and other senior UAW officials, accusing them of embezzling, stealing and converting union funds to rent poolside villas in California, buy more than $100,000 worth of golf equipment, buy more than $60,000 worth of cigars and spend thousands more for meals at high-end restaurants, prosecutors alleged.

“It’s a real problem for the UAW leadership,” said Peter Henning, a Wayne State University law professor and former federal prosecutor. “The region Jones came out of has now been identified as the subject of embezzlement. Those are very serious charges. It’s quite an indictment of the UAW when you’ve identified other top-level officials as potentially being involved in embezzlement, in fraud, in money laundering. (Pearson) didn’t do this on his own.”

The money laundering, mail and wire fraud charges against Pearson are punishable by up to 20 years in federal prison. Embezzlement is a five-year felony. Pearson's lawyer did not respond to a message seeking comment Thursday.

The criminal case focuses on lavish spending by UAW officials during conferences in Missouri and California and provides the most detailed government account of alleged misspending in Palm Springs, including $120,000 for cigars, steak dinners and drinks, and 107 rounds of golf. The News exclusively reported the government's interest in Palm Springs in September 2018.

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Tour golf courses and resorts frequented by UAW officials in Palm Springs, Calif., where the union has spent more than $1 million in recent years. Robert Snell, The Detroit News

Pearson, who heads the union's largest geographic region covering a large portion of the western half of the United States, conspired with other senior UAW leaders to hide personal expenditures during the conferences, prosecutors said.

Pearson, 58, of Saint Charles, Missouri, served on the board of directors overseeing Jones' charity and succeeded Jones as director of the region. Pearson, arrested Thursday, is the 10th person charged in a widening corruption investigation of the UAW.

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From 2014 to 2018, a period that covers Jones' tenure leading UAW Region 5, Pearson and other leaders submitted phony expense forms seeking reimbursement from UAW headquarters, prosecutors said. The phony expenses were supposedly tied to UAW Region 5 leadership and training conferences.

“The investigation ... uncovered a multi-year conspiracy involving senior UAW officials embezzling, stealing and unlawfully and willfully abstracting and converting UAW funds to purchase luxury items and accommodations for their own personal benefit," Donohue wrote. "The outlay of the funds was not properly approved, was concealed from the view of the UAW members, and used for the personal benefit of the upper echelon of union officials who were elected to represent the members’ best interests above their own.”

Region 5, which covers 17 states stretching from Missouri to California, was headed by Jones until he was elected UAW president last year. Pearson and other unnamed UAW leaders used the conferences to conceal the use of hundreds of thousands of dollars of union member dues to pay for entertainment and personal expenses, according to the affidavit.

Williams was implicated in the scandal last year when a former labor official told federal prosecutors that Williams directed subordinates to use funds from Detroit’s automakers, funneled through training centers, to pay for union travel, meals and entertainment.

The former UAW official, Nancy Adams Johnson, told investigators Williams made the directive to relieve pressure on the union’s budget.

Williams, who retired last year, is not identified by name in the Pearson criminal case. Sources familiar with the investigation, however, named Williams as "UAW Official B," who is described in the criminal case as a former union officer.

"UAW Official B" is accused in the criminal case of using union funds to rent a villa in Palm Springs during UAW conferences from 2013-17. The conferences each year lasted up to five days. But villas were rented for "UAW Official B" for months at a time, including a 121-day stay two years ago in Cathedral City, California, that cost the union $20,000, prosecutors said.

Meantime, a separate villa was rented for "UAW Official A" in Palm Springs during UAW conferences during the same period, according to the affidavit. One 63-day stay cost $10,000 in 2016.

During that time period, Jones headed the UAW's Region 5 office near St. Louis, Missouri. The powerful position placed Jones one tier below vice presidents assigned to Detroit automakers. The affidavit alleges "UAW Official A" used villas, dinners, clothing, liquor and cigars to “curry favor with” Williams, “who also enjoyed the lavish lifestyle.”

Alcohol played a major role in the conspiracy, according to the government. "During the course of the investigation, agents have developed significant information concerning the 'culture of alcohol' that exists in the senior ranks of the UAW,"  Donohue wrote.

UAW leaders used training center funds from Fiat Chrysler Automobiles to pay the booze bill, including $185 for a bottle of Crown Royal whiskey for "UAW Official B," Donohue said.

Training center vendors "told agents that there was 'no limit' on the amount of alcohol they would purchase for requesting union officials," Donohue wrote.

More funds were used paying golf bills. Pearson and others used union dues to buy golf equipment, including more than $100,000 for golf clothes, shirts, hats, sunglasses, golf balls, jackets and fashion shorts at conferences in California and Missouri lasting as long as five days, prosecutors said.

"However, UAW officials, including Pearson, and others would spend weeks and/or months living in Palm Springs enjoying an extravagant lifestyle paid for with UAW funds," Donohue wrote. 

The affidavit also provided new details about Palm Springs expenses. Between 2014 and 2017, the UAW spent more than $1 million at the Renaissance Palm Springs Hotel.

The affidavit alleges UAW officials “hid their personal use of UAW money without any legitimate union business purpose,” spending UAW dollars outside of the dates of the annual conference in Palm Springs from a "master account" that allowed UAW authorized staff to sign for payments at local restaurants, golf courses, and additional retail outlets.

According to the affidavit, UAW officials allegedly:

• Paid $400,000 to rent and clean private villas with private pools and hot tubs in gated communities for weeks at a time. But the UAW conference hosted there lasted only three days.

• Paid $60,000 between 2016 and 2018 on meals at LG’s Prime Steak House and Johnny Costa’s Ristorante outside the scheduled dates of the conferences. That included more than $6,599.87 for a New Year's Eve meal in December 2016, $1,942 on liquor, $1,440 on wine, a $1,100 tip and a purchase of four bottles of Louis Roederer Cristal Champagne for $1,760.

• The master account was allegedly used to pay Indian Canyons Golf Resort $80,000 between 2015 and 2018 for people identified only as "UAW Official A." That included thousands of dollars spent at the resort’s pro shop on clothing, golf bags and shoes. The affidavit says that the UAW paid for 107 rounds of golf outside the conference dates at a cost of almost $9,000 to UAW membership.

• Through the master account, the affidavit alleges UAW officials spent $60,000 on cigars, humidors and cigar cutters between 2014 and 2018.

• Using a similar account at a different resort, the UAW spent $70,000 on golf at The Maderas Golf Club, The Grand Del Mar Golf Resort and The Torrey Pines Golf Club.

• Federal agents also found a similar arrangement at the Lodge of Four Seasons in Lake Ozark, Missouri. Agents found that more than $45,000 was spent by the UAW outside of conference dates in Lake Ozark on meals and liquor.

• The UAW spent $50,000 on two parties thrown “under the guise that they were dinners" for the International Executive Board, the union's governing body. That included “thousands of dollars of ‘ultra-premium’ liquor, cigars, a torcedor (a person who rolls cigars) and ‘kandy girls’ (provocatively dressed women) to light the cigars for the UAW officials. If that alone were not enough, training funds were also spent on mojito tables and decorations to theme the event like the 1980’s hit T.V. show Miami Vice.”

"I don't know if it's true or not true," said Art Wheaton, director of the Western New York Labor and Environmental Programs at Cornell University's Worker Institute. "It challenges your relationships at work no matter what. It's a distraction that they absolutely do not need."

rsnell@detroitnews.com

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