Feds Implicating UAW Chief Injects Crucial GM Talks With Chaos

(Bloomberg) -- Just as the United Auto Workers and General Motors Co. near a deadline to reach a new labor contract, a federal corruption probe has implicated the union’s president, setting the stage for a chaotic weekend.

UAW President Gary Jones is one of the unnamed officials accused of taking part in a years-long conspiracy to embezzle member dues and spend it on lengthy stays at luxury villas and tens of thousands of dollars worth of golf gear and cigars, according to a person familiar with the federal probe who asked not to be identified.

That creates a problem for GM negotiators as they seek to replace the existing labor deal -- currently scheduled to expire Saturday at midnight -- because any deal reached needs to be ratified by union membership. If the rank-and-file don’t trust their negotiators, the union is likely to struggle getting a new agreement ratified.

Kristin Dziczek, vice president of the industry and labor economics group at the Center for Automotive Research, said she “wouldn’t be surprised” if Jones resigns. The activities the government alleges in its charging document “would create cause for concern among the other members of the executive board.”

Federal agents arrested Vance Pearson, Jones’s successor as the head of the UAW’s largest region and a member of the union’s international executive board, on Thursday and charged him with conspiracy and money laundering. While Jones isn’t named and hasn’t been charged, his home was raided late last month, and the government’s complaint mentions the search of a current UAW officer’s residence that turned up items similar to those Pearson is accused of buying with members’ dues.

Brian Rothenberg, a UAW spokesman, declined to comment beyond a statement issued Thursday. He called the allegations against Pearson “very concerning” but added that the union believes the government “has misconstrued any number of facts.” Jones’s lawyer didn’t respond to requests for comment.

The Detroit News reported earlier that Jones is one of the unnamed officials mentioned in the government’s complaint.

Already Angry

Pearson and Jones are the two most recent leaders of the UAW’s Region 5, which oversees locals spanning states including Missouri, Texas and California. Jones was elected president in late 2018, ahead of the expiration of contracts this year for members employed by GM, Ford Motor Co. and Fiat Chrysler Automobiles NV. The union extended its agreements with Ford and Fiat Chrysler on Friday while it focuses on hammering out a deal with GM.

Union workers already were angry entering this year’s talks by GM’s announcement in November that it wouldn’t allocate future products to four U.S. plants. But their trust in UAW leadership also has been shaken by convictions of nine union leaders and Fiat Chrysler executives over the past year for exchanging gifts prosecutors have said were aimed at keeping labor officials “fat, dumb and happy.”

After taking office, Jones vowed to carry out a “Clean Slate Agenda” at the UAW’s special bargaining convention in March, pledging to rid the union of corruption and restore the trust of the rank-and-file.

Luxurious Lodgings

That rhetoric stands in stark contrast with the government’s latest charges. Prosecutors allege that more than $1 million of union money was sent to the Renaissance Palm Springs Hotel in California and $490,000 to the Lodge of Four Seasons in Lake Ozark, Missouri, for stays that lasted well beyond the UAW’s official business purpose.

Pearson, 58, and other senior UAW officials allegedly used union money to buy more than $100,000 worth of golf clothing and gear and embezzled more than $60,000 to purchase cigars, golf equipment and to pay greens fees and rental rates for months at a time.

Jones is said to be the person referred to in court filings as “UAW Officer A,” who allegedly rented a Palm Springs villa for 31 days starting in December 2013, despite the union’s conference there lasting three days in January. In 2014, he allegedly rented a villa there for 34 days, and starting in December 2015, he rented one for 63 days, at a cost of about $10,000 to the union.

The charges also say that union officials spent $60,000 on meals in Palm Springs restaurants and falsely represented the cost as expenses for UAW conferences. There are also invoices for $13,000 in cigars under Jones’s account.

When investigators executed a search warrant on Jones’s suburban Detroit home last month, they seized Titleist golf clubs consistent with those purchased at a private Missouri golf club with UAW funds, plus $30,000 in cash, according to the complaint.

Big Fundraiser

Some of the money that was allegedly embezzled came from union Community Action Program, or CAP, funds, according to the government. CAP funds are raised by gathering voluntary donations from union members and are supposed to be used for community engagement and political activism. Region 5 raised more money than any other region for 20 years in a row though 2017, according to a UAW statement.

The union’s February 2018 press release said that Region 5 raised more than $2 million in 2017 and that Jones was targeting $3 million for 2018. He’s photographed posing with Dennis Williams, the UAW’s previous president.

“There’s a whole lot of other people at the UAW working on negotiations with General Motors,” Dziczek said. “Gary Jones is one person; he’s the most powerful person. But we don’t know what the union may do in light of this new information.”

To contact the reporters on this story: David Welch in Southfield at dwelch12@bloomberg.net;Keith Naughton in Southfield, Michigan at knaughton3@bloomberg.net

To contact the editors responsible for this story: Craig Trudell at ctrudell1@bloomberg.net, Chester Dawson

©2019 Bloomberg L.P.