FCA sentenced for paying more than $3.5M in bribes to UAW leaders
A federal judge on Tuesday sentenced Fiat Chrysler Automobiles NV to pay $30 million for conspiring to break federal law in the largest labor case against a Detroit automaker whose employees are represented by the United Auto Workers.
FCA, now part of Stellantis NV, must pay that fine within the next 30 days. But the $3.5 million in bribes the automaker made to UAW leaders has even longer lasting implications for the maker of Jeep and Ram vehicles. An as-yet-unnamed independent monitor for the next three years will oversee the company's compliance with labor laws and the dissolution of a joint training center the UAW operated with FCA. The company's actions also could have implications for labor negotiations in 2023.
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"I think we’re getting the short end of the stick," said John Barbosa, 50, of Clinton, a skilled trades apprentice at Toledo Assembly Plant. "I think Stellantis is getting off easy, way too easy. There’s not any way you can convince me that the contracts weren’t tainted, because of the company’s actions conspiring with the union officials and giving them extravagant gifts and money, and we’re not getting anything back from FCA."
FCA pleaded guilty in March to one count of conspiracy to violate the Labor Management Relations Act following a years-long investigation into UAW corruption. The probe produced 15 convictions, including three former FCA executives. The money Stellantis pays will go to the U.S. Treasury general fund. FCA is not required to pay any sort of restitution.
"This is a warning to the new ownership that you can’t play games with the U.S. labor law," said Art Wheaton, an automotive industry specialist at Cornell University's Industrial and Labor Relations School. "It's an important reminder for the UAW members that it wasn’t just their union that was corrupt. They were enticed or lured by some illegal activities that were being done by the company."
And when it comes to the next round of negotiations in 2023, Wheaton said, it "may make the first contract harder to ratify."
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 nature and circumstances of this offense are very serious," Judge Paul Borman of the Eastern District of Michigan said during the sentencing. "The history and characteristics of the defendant relating to this charge show a prior pattern culminated in this and was resolved in this plea and sentence."
Calling FCA's offense one of the largest, if not the largest, violation of the Labor Management Relations Act, Erin Shaw of the U.S. Attorney's Office said the company's acts have undermined the rank-and-file's trust in their leaders and the collective bargaining process.
"We are pleased FCA has agreed to accept responsibility for its conduct and appears to be committed to making reforms," Shaw said. The facts of the case "make clear this was not the act of a rogue or low-level employee at FCA, and it is abundantly clear that there was a problem with the culture of this company in years past."
Nicolas Broutin, a New York attorney, represented the automaker in the sentencing hearing, stated in brief: "The agreement was negotiated at length with the government. It includes an extensive factual statement that the company has agreed to for all the reasons put on the record at the guilty plea hearing. We believe it is an appropriate resolution and the court should accept it as it is done."
The pre-sentencing report recommended a one-to-five year probation. FCA's will be three years. The report also called for $18 million to $36 million for the fine, putting FCA's sentencing at the high end.
The $30 million FCA must pay 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.
Though the $30 million fine may be "doughnut money" for Stellantis, which raked in $7 billion in profits in the first half of 2021, "there is a signal that the judge has listened to everything, and that this is very serious," said Erik Gordon, professor at the University of Michigan's Ross Business School. "FCA didn’t get the government out of its hair. There is going to be a monitor. I don’t think they got closure as much as they got certainty about the path going forward."
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 according to the Bureau of Prisons is serving the final part of his four-year federal prison sentence in a Detroit halfway house — also authorized spending $25,000 for a party for former 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 for worker training.
The conspiracy also included Michael Brown, who helped run the UAW-Chrysler National Training Center in Warren, and former FCA financial analyst Jerome Durden, who helped control the finances at the training center.