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Prosecutors in UAW Probe Open Door to Racketeering Charges

Prosecutors in UAW Probe Open Door to Racketeering Charges

(Bloomberg) -- The United Auto Workers isn’t cooperating fully with a Justice Department corruption investigation, which could lead to broad-based racketeering charges against the labor union and potentially a government takeover, according to a top federal prosecutor.

“I still haven’t seen complete cooperation. That’s what we really want” from the UAW, said U.S. Attorney Matthew Schneider, who is heading the department’s probe. “So far the evidence indicates that the UAW knew of wrongful acts, but didn’t let us know.”

The union is facing pressure to provide more details about potential wrongdoing amid allegations its leaders conspired to engage in bribery, misuse of funds and kickbacks. The scandal has already led to the jailing of several former UAW officials and implicated others, including its former president, Gary Jones, who stepped down last month before resigning from the union.

Schneider said the UAW’s internal effort to forcibly remove Jones, through a process known as Article 30, revealed information previously undisclosed to prosecutors. That indicates the union’s problems may be systemic enough to invoke a charge of violating the Racketeer Influenced and Corrupt Organizations Act, known as RICO, which the government used against the Teamsters union.

“All options are on the table. No matter what it is, RICO suit or what have you,” he said in an interview. “It should not be taken off the table,” he said, along with possible federal supervision of the UAW.

The government’s 30-year-long oversight of the Teamsters lifted in 2015. UAW Acting President Rory Gamble has committed to rooting out corruption to stave off a similar fate involving federal supervision. As part of that effort, the union released a set of new ethics rules last month followed by a slate of financial reforms on Monday.

But the Justice Department doesn’t believe those go far enough to clean house.

“It is a culture of corruption that has been going on for years. That’s why it’s difficult to get to the bottom of some of this,” Schneider said. “With the UAW, we have an interest in making sure it’s completely clean and that everything is vindicated.”

The pressure on the union comes at an awkward time. Its national Fiat Chrysler council on Wednesday approved a tentative agreement reached with the company last week and has put the contract up for a ratification vote by the full membership.

The union also has been implicated in a racketeering lawsuit filed by General Motors Co. against Fiat Chrysler Automobiles NV last month, which alleges illicit payments to UAW leaders from the Italian-American carmaker dating back to 2009. GM says that cost it billions of dollars in the form of inflated labor contracts, but Fiat Chrysler has denied the allegations.

Schneider wouldn’t comment on GM’s suit, saying it was a separate matter from the government investigation. He also declined to specify how far back his team is looking into union misdeeds.

“I don’t think this is a series of just one or two people engaging in wrongdoing,” he said.

The federal probe became public two years ago and stepped up this summer with a raid on the suburban Detroit home of then-UAW head Jones, during which federal investigators seized golf clubs and $30,000 in cash.

Jones has not been charged with a crime, but is a co-conspirator in an embezzlement case and identified in court filings as “UAW Official A,” according to a person familiar with the probe who asked not to be identified. He was similarly identified in a case involving his former aide, the person said.

Schneider didn’t provide a time line for wrapping up his inquiry, but said new information from the public has been coming in recent weeks that could extend the investigation. “Now that we are getting additional tips in, it might go on longer.”

To contact the reporters on this story: Chester Dawson in Southfield at cdawson54@bloomberg.net;David Welch in Southfield at dwelch12@bloomberg.net

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

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