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UAW kickbacks paid for cosmetic surgery, homes and more, feds say

Robert Snell
The Detroit News

Detroit — The $1.5 million in kickbacks a corrupt United Auto Workers official received included cash and $10,000 worth of cosmetic surgery for a relative, federal prosecutors said Tuesday.

The new details were revealed as prosecutors asked a federal judge to sentence former UAW official Mike Grimes to two years in federal prison for his role in a bribery and kickback scheme that involved two others, including former union vice president Joe Ashton.

Former UAW official Mike Grimes.

Grimes is portrayed as a vindictive shakedown artist, demanding kickbacks from UAW vendors who supplied union-branded merchandise and penalizing one UAW contractor who initially refused his demands. Once the unidentified vendor agreed to pay kickbacks, Grimes forced him to pay an extra $5,000, prosecutors said.

"...the culture of corruption within the senior leadership of the UAW is systemic," Assistant U.S. Attorney Eaton Brown wrote. "The need to transform the unethical, greedy, and self-indulgent behavior characteristic of the UAW leadership is long overdue."

Grimes, 66, of Fort Myers, Florida, will be sentenced Feb. 19 by U.S. District Judge Bernard Friedman. Grimes' defense lawyer declined comment Tuesday but will soon file a separate sentencing memorandum in federal court.

He pleaded guilty in September to wire fraud conspiracy and money laundering. Though sentencing guidelines call for almost five years in prison, prosecutors are recommending less time behind bars because Grimes cooperated with an ongoing investigation.

That investigation has led to charges against 13 people and a dozen convictions and revealed that UAW leaders embezzled money from worker paychecks, shook down union contractors and schemed with auto executives.

Former UAW presidents Gary Jones and Dennis Williams have not been charged with wrongdoing but prosecutors implicated them in a racketeering enterprise that embezzled more than $1.5 million in union funds.

Federal agents also are probing financial ties between new UAW President Rory Gamble, retired vice president Jimmy Settles and one of the union's highest-paid vendors.

The agents are investigating whether UAW leaders received cash kickbacks or bribes in exchange for awarding lucrative contracts to Huntington Woods businessman Jason Gordon to supply union-branded merchandise, sources told The Detroit News last month.

As part of his guilty plea, Grimes has agreed to forfeit all property he received through the wire fraud and money-laundering schemes. He agreed to forfeit $1.5 million, money he personally obtained as bribe payments from the vendors.

Vendors were awarded contracts from the UAW-GM training center to produce UAW-branded merchandise in exchange for paying bribes and kickbacks. The conspiracy started in 2006 and lasted until July 2018, according to the government. During that time, Grimes served as a top aide to several vice presidents, including Ashton and current Vice President Cindy Estrada, and was paid $150,574 a year.

"Rather than employ his increased responsibility to advocate for his union brotherhood, Grimes manipulated his leadership role and demanded bribes and kickbacks from vendors of the UAW-GM joint training center, the Center for Human Resources (CHR)," Brown wrote. "For twelve years, Grimes’s “pay to play” scheme reaped over $1.5 million which he spent on property, houses, cosmetic surgery for a relative, and other items that never benefited the UAW membership."

Starting in 2010, Grimes received almost $900,000 worth of kickbacks from a union vendor, prosecutors said. In 2011, the same union contractor — identified in court records as "Vendor A" — gave Grimes an additional $530,000.

"Vendor A tried to reject Grimes’s demands, but ultimately agreed to give Grimes a $530,000 cashier’s check ($525,000 plus a $5,000 penalty for Vendor A’s initial refusal) payable to Grimes’s relative," prosecutors wrote Tuesday.

The same vendor paid for the cosmetic surgery.

"...Grimes also asked Vendor A to fund a $10,000 cosmetic procedure for Grimes’s relative," Brown wrote. "Vendor A agreed and wrote a check directly to the doctor who performed the surgery."

To hide illegal payments, the vendor wrote checks payable to "KKG Consulting," which prosecutors called a sham company. State business records show the company was created by Grimes' wife Karen in 2001.

While pleading guilty in September, Grimes said he committed financial crimes due to economic hardship.

Public records indicate Grimes was facing tax problems in 2013, but he was receiving kickbacks years before the tax issue emerged and afterward while amassing a multimillion-dollar real estate portfolio.

By February 2017, Grimes appeared flush with cash. He and his wife took out a $284,000 mortgage and bought a new $730,000 home in Fort Myers, according to property records. He also bought a 2017 Jeep Wrangler. Those assets are expected to be forfeited to the government and used to pay a portion of the $1.5 million that he owes.

"Ultimately, Grimes placed his drive for personal enrichment ahead of his fiduciary responsibilities to the UAW and the CHR, and for that he should be punished," Brown wrote.

rsnell@detroitnews.com

Twitter: @robertsnellnews