Feds slap 'racketeering' label on 2 ex-UAW presidents
Detroit — Federal prosecutors for the first time Monday referred to former United Auto Workers presidents Gary Jones and Dennis Williams as members of a racketeering enterprise, a move legal experts say signals the government's interest in pursuing a takeover of one of the nation's largest and most powerful unions.
The label, included in a new criminal filing against former UAW Region 5 Director Vance Pearson, also signals that the government is considering filing federal racketeering charges against people implicated in a scheme that embezzled more than $1.5 million in union funds, according to sources familiar with the investigation. The sources spoke on condition of anonymity because they were not authorized to discuss the case.
In charging Pearson with embezzlement conspiracy, prosecutors accused the former labor leader of embezzling money and committing other crimes "in aid of a racketeering enterprise." That is the government's first public reference to racketeering — a term often associated with organized crime — during a nearly three-year prosecution of UAW officials involved in corruption.
Prosecutors used the label two months after U.S. Attorney Matthew Schneider said government oversight of the UAW is a possible solution to reforming a union plagued by what his team of prosecutors has called a culture of corruption among senior leadership. Prosecutors could seize control by filing a civil racketeering lawsuit, a move that could cost the union tens of millions of dollars, impose prolonged federal oversight and involve replacing labor leaders.
The criminal filing Monday also opens the possibility of pursuing criminal racketeering charges against members of the "racketeering enterprise," sources said. Those members, according to the government, include Pearson and at least six others, including Missouri-based UAW official Edward "Nick" Robinson and five UAW officials who are referred to by pseudonyms in federal court filings.
Jones and Williams are not identified by name in court filings. Instead, prosecutors refer to them as "UAW Official A" and "UAW Official B."
“The UAW itself has not been charged and I know that U.S. Attorney Schneider has been critical of their efforts to provide information and to cooperate in the probe so if they use the term 'racketeering enterprise' that could be a signal that the union itself is becoming a part of the probe,” said Andrew Kochanowski, an attorney for the Sommers Schwartz law firm in Southfield who has worked on civil racketeering cases since the 1980s.
“I think it’s a fair assumption that they are cranking up the pressure” on the union, Kochanowski said.
Pearson, a close aide to Jones, is expected to plead guilty for his role in the embezzlement conspiracy, according to federal court records filed Monday.
Pearson's lawyer could not be reached for comment immediately Monday.
A lawyer for Jones declined comment. Lawyers for Williams could not be reached for comment immediately Monday.
Prosecutors filed a new criminal charge against Pearson four months after he was accused of helping embezzle more than $1.5 million in union funds spent on personal luxuries, including cigars, golfing, clothes and tips for caddies.
“Using the term racketeering shows that the government may not stop with indictments and convictions of individual union leaders,” said Erik Gordon, professor at the University of Michigan Ross School of Business.
The government could be signaling it's building a case against the UAW itself, not just the individuals within the union, experts say.
If the government believes the corruption is so widespread that it is “of the union itself, that could lead to the government trying to get control of the union, put the union in some de facto trusteeship so that all the leaders can be swept out,” Gordon said.
Pearson, 58, who until last fall headed the UAW's largest geographic region, was charged in a criminal information that signals a likely guilty plea.
A guilty plea and cooperation from Pearson could help bolster an ongoing investigation targeting Jones and Williams, who are accused of helping orchestrate a years-long conspiracy that involved embezzling more than $1.5 million in union funds and spending the money on personal luxuries.
Neither Jones nor Williams has been charged with wrongdoing during the ongoing investigation.
“If (Pearson) cooperates, it will be much worse for Jones and Williams,” said Peter Henning, a Wayne State University law professor and former federal prosecutor. “The key to any case is a cooperating witness who can point the finger at others.”
Prosecutors said Monday that Pearson helped embezzle $32,000 in 2016. That figure included $19,000 spent on golf, tips and golf equipment purchased by Pearson and eight other union officials during a UAW conference in California, according to the criminal filing.
Those officials include "UAW Official A," who is Jones.
"Pearson falsely told (a) UAW accounting official that the $19,041.33 expense had been for 'meals,'" Assistant U.S. Attorneys David Gardey and Steven Cares wrote. In November 2016, at Jones' direction, Pearson "ordered over $13,000 in cigars," from an Arizona company, prosecutors wrote.
The new criminal charge was announced two months after prosecutors revealed they met in secret with Pearson in Missouri while trying to convince him to plead guilty in a widespread corruption conspiracy.
The meeting came two months after Pearson was arrested and charged with embezzlement of union funds, mail and wire fraud, and money laundering. He originally was accused of teaming with Jones, Williams and others to embezzle more than $1 million in member dues that were spent on luxuries, including private villas, liquor, golf and cigars.
Pearson was placed on leave after being charged in federal court and later resigned.
“Make no mistake about it. If Vance Pearson misused union funds to buy personal items for himself and others, and then lied about and hid that conduct from the UAW, he blatantly violated his oath of office and betrayed the trust of all our hard-working members," the UAW said in a statement Monday.
A team of federal agents from the Federal Bureau of Investigation, Labor Department and Internal Revenue Service has spent at least five years conducting an investigation that has produced charges against 13 people and implicated the late Fiat Chrysler Automobiles CEO Sergio Marchionne.
In October, the government disclosed that investigators were armed with evidence that includes bank records, cooperation from top labor leaders and what court records suggest are secret recordings.
The records describe conversations among UAW officials, including Jones and Pearson, last year and directly quote labor leaders talking about destroying evidence and obstructing justice.
The use of direct quotes is a strong indication investigators obtained audio recordings of Jones, Pearson and other UAW officers either through a wiretap or a hidden recording device, legal experts told The News.
The government has yet to file discovery notices in federal court that would reveal whether prosecutors have evidence obtained through wiretaps or other electronic surveillance.
In court filings, prosecutors quoted a conversation between Pearson and UAW official Edward "Nick" Robinson in July.
Pearson told Robinson he would get him a burner phone so UAW officers involved in the conspiracy could talk freely without fear of being recorded by a federal wiretap, according to the criminal filing.
Pearson also told Robinson if he had anything incriminating "at your house, then get rid of it," prosecutors wrote.
Pearson, a St. Charles, Missouri, resident, served on the board of directors overseeing Jones' charity and succeeded Jones as director of UAW Region 5. The region covers 17 states and is based in suburban St. Louis.
In the wake of allegations involving Pearson and others, the UAW announced it will disband Region 5.
Pearson's home in suburban St. Louis and Region 5 office were raided by federal agents Aug. 28 as part of a nationwide search in four states targeting UAW officials, including Jones and Williams.