Ex-Chrysler Executive Admits to Diverting Training Funds

(Bloomberg) -- A former Fiat Chrysler Automobiles NV executive pleaded guilty to diverting money from a United Auto Workers training fund, while keeping $1 million for himself to spend on a Ferrari, a swimming pool and Mont Blanc pens.

Alphons Iacobelli, 58, entered his plea Monday in Detroit federal court to charges of conspiracy to violate the Labor Management Relations Act and filing a false tax return.

He admitted to diverting more than $1.5 million in prohibited payments to UAW officials and representatives, including former UAW Vice President General Holiefield and former UAW associate director Virdell King. Holiefield died in 2015. King and former Fiat Chrysler analyst Jerome Durden have pleaded guilty to playing roles in the scheme.

Prosecutors said Iacobelli, who led U.S. labor relations for the automaker until June 2015, took more than $1.2 million from the UAW-Chrysler National Training Center to pay Holiefield and his wife, Monica Morgan. The money was allegedly used to buy jewelry, designer clothing and furniture, and to pay off a mortgage. Iacobelli also diverted $1 million from the fund for himself, which he used to buy the sports car and two pens costing $37,500 each, and to install the pool at his home, according to prosecutors.

Iacobelli has already turned over $354,000 to the government for the Ferrari and has agreed to give up the two pens, which are Abraham Lincoln-themed. He also agreed to file amended tax statements and help the U.S. Internal Revenue Service identify any other recipients of unreported income from the training fund from 2009 to 2015. He acknowledged a failure to report more than $860,000 in income.

Tax-Exempt

Iacobelli and other FCA employees transferred hundreds of thousands of dollars in prohibited payments from FCA, through the National Training Center, into tax-exempt organizations controlled by UAW officials, including Holiefield’s Leave the Light On Foundation, according to the plea agreement. According to the agreement, Iacobelli faces a maximum sentence of 96 months.

Morgan also was charged with conspiracy to violate the Labor Management Relations Act. She pleaded not guilty to the charges in July.

Fiat Chrysler acted swiftly to dismiss the individuals who enriched “themselves and their families at the expense of their fellow employees,” Chief Executive Officer Sergio Marchionne told employees the same month.

UAW Scrutiny

The charges, filed in June, came as legal troubles were intensifying for Fiat Chrysler over possible environmental, safety and securities-law violations. The widening probe into use of training center funds to buy expensive gifts for union officials and others also has put uncomfortable scrutiny on the UAW.

In August, Nissan Motor Co. workers at a Mississippi factory voted against joining the union nearly two-to-one, resulting in another setback for organized labor in the U.S., whose membership is on the decline. The union has largely failed for years to organize Japanese, German or Korean automakers’ American factories.

The case provides “one little sound bite” for groups that oppose unionizing drives, said Art Wheaton, a labor professor at Cornell University. But it may not be very effective, since corruption isn’t widespread, he added: “It’s negative, but it’s not pervasive.”

From 2009 to 2014, Iacobelli and others transferred hundreds of thousands of dollars from the training center fund to Holiefield and Morgan through intermediary companies that Morgan controlled, according to the government. Prosecutors alleged that the payments were also omitted from federal tax forms.

In June 2014, Iacobelli authorized $262,219.71 to pay off Holiefield’s and Morgan’s mortgage, and in August of that year, the executive authorized spending more than $30,000 on a party for a UAW official that included “ultra-premium” liquor, more than $7,000 worth of cigars and more than $3,000 worth of wine with customized labels, according to prosecutors.

Employers are prohibited from paying, lending or delivering any money or other things of value to labor organization officials representing their workers. The company has said it first learned of the conduct in June 2015, prompting Iacobelli’s departure.

The case is U.S. v Iacobelli, 17-cr-20406, U.S. District Court, Eastern District of Michigan, Southern Division (Detroit).

--With assistance from John Lippert and Margaret Cronin Fisk

To contact the reporters on this story: Jamie Butters in Southfield, Michigan, at jbutters@bloomberg.net, Christie Smythe in Brooklyn at csmythe1@bloomberg.net.

To contact the editors responsible for this story: David Glovin at dglovin@bloomberg.net, Elizabeth Wollman, Peter Blumberg

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