FCA guilty in labor corruption scandal as auto industry marks new low
Detroit — A Fiat Chrysler U.S. executive admitted Monday the automaker conspired to break federal labor laws by paying more than $3.5 million in bribes to union leaders, marking a new stain for an auto industry beset with scandals in recent years involving vehicle emissions and faulty equipment implicated in hundreds of deaths.
In pleading guilty to one count of conspiracy to violate the Labor Management Relations Act, the transatlantic automaker also agreed to pay a $30 million fine to settle a criminal investigation into auto executives breaking federal labor laws. The fine is part of a broader settlement with federal authorities that includes the appointment of an independent monitor for three years to oversee company compliance with labor laws and oversee dissolution of a joint training center the United Auto Workers operated with Fiat Chrysler, now part of Stellantis NV.
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The legal development ends prolonged negotiations stemming from a years-long corruption scandal involving the UAW. The federal investigation produced more than a dozen convictions and revealed union leaders and auto executives broke federal labor laws, stole union funds and received bribes and illegal benefits from union contractors and Fiat Chrysler Automobiles executives.
The pattern of illegal payments included paying off former UAW Vice President General Holiefield's $262,000 mortgage, bankrolling a $25,000 booze-fueled bash for another labor leader and financing a $30,000 junket for UAW officials in Palm Springs and southern California. The payments were designed to secure concessions, and advantages for Fiat Chrysler during contract negotiations, according to the government.
The hearing Monday in front of U.S. District Judge Paul Borman was sterile, unconventional and anticlimactic after approximately two years of negotiations between federal prosecutors and FCA lawyers. The automaker's top lawyer, Chris Pardi, stood in as the company's representative during the virtual hearing Monday, watching with a blank, unblinking look on his face as prosecutors described crimes committed by other FCA executives during a prolonged conspiracy.
“The public thinks the companies and the UAW fight each other but just as often the companies and UAW leaders corruptly collude at the expense of the unionized workers,” Erik Gordon, a professor at the University of Michigan’s Ross Business School, wrote in an email to The Detroit News on Monday.
Fiat Chrysler has 60 days to nominate three candidates to serve as monitor who will serve for three years. Federal prosecutors have the right to reject the nominees until both sides agree on a monitor.
“You’re putting the fox in charge of the hen house,” John Barbosa, 50, a team leader at Stellantis’ Dundee Engine Plant, said of the monitorship included in the plea agreement. “It’s like putting police in charge of investigating the police. It don’t work. It puts on a show for people who don’t know any better.”
The guilty plea Monday obligates Fiat Chrysler officials to cooperate with ongoing investigations of corruption within the auto industry.
“If they violate the law during the term of probation, if they provide deliberately false, incomplete or misleading information or fail to retain an independent compliance monitor…, the United States could reinstate criminal charges and bring any other charges based on underlying conduct…,” Assistant U.S. Attorney Erin Shaw said.
The News has previously revealed investigators were probing financial ties between retired UAW Vice President Jimmy Settles and one of the union's highest-paid vendors.
After the courts have dismissed class-action lawsuits brought against the automaker by other employees, Barbosa said the situation is infuriating: “We’ve been robbed of potentially thousands of dollars in income because of that; the contract talks were tainted. Nothing is going to be done opening and renegotiating those contracts.”
The $30 million fine is dramatically less than the $900 million rival General Motors Co. paid to settle claims for faulty ignition switches implicated in 400 injuries and deaths. It also is a fraction of the $800 million FCA paid two years ago to settle diesel claims, or the billions Volkswagen AG paid to atone for its global diesel scandal.
“Instead of negotiating in good faith, FCA corrupted the collective bargaining process and the UAW members’ rights to fair representation,” Labor Department official Irene Lindow said in a statement.
Just as FCA has been found to spend millions of dollars on bribing UAW officials, “when it comes to costly environmental regulation, the companies are just as willing to put their technical expertise to work on cheating as on compliance," Gordon added.
The proposed deal was announced six weeks after prosecutors secured a separate deal with the UAW that includes prolonged oversight of the troubled union.
The conspiracy involving Fiat Chrysler executives lasted from at least January 2009 through approximately 2016 and executives paid more than $3.5 million in illegal payments to UAW officials, according to the criminal case.
That includes former Fiat Chrysler Vice President Alphons Iacobelli approving the payment of $262,000 to pay off the mortgage on Holiefield’s home in Harrison Township. Holiefield died in 2015 before he could be charged with a crime.
Iacobelli, who is serving a four-year federal prison sentence, also authorized spending $25,000 for a party for UAW Vice President Norwood Jewell and members of the union’s governing board. The party included "ultra-premium" liquor, more than $7,000 worth of cigars and more than $3,000 worth of wine with custom labels honoring Jewell, who also was convicted in the corruption scandal.
Iacobelli also approved spending more than $30,000 on meals for UAW officials at restaurants in Palm Springs and southern California, prosecutors said. Money to pay for the illegal benefits came from accounts funded by the automaker that were supposed to used to pay for worker training.
The conspiracy described by prosecutors Monday included former FCA financial analyst Jerome Durden, who helped control the finances at the UAW-Chrysler National Training Center.
He was portrayed as a pivotal figure in the auto industry corruption scandal, helping funnel illegal payments to UAW officials involved in a labor conspiracy. He helped control the finances of a training center and was the first person charged in an ongoing prosecution that has led to 13 convictions.