The United Auto Workers knew a settlement was coming. Now comes the hard part: compliance. This past Monday, December 14, Matthew Schneider, U.S. Attorney for the Eastern District of Michigan, announced that his office and the UAW had settled a civil suit filed earlier that day against the union based on acts of fraud, embezzlement and tax evasion committed by certain among its members. Criminal investigations had led to charges and convictions of 15 individuals, mostly union officials, including recent UAW Presidents Gary Jones and Dennis Williams. Most thus far have received sentences. The consent order, which requires court approval, creates an Independent Monitor possessed of the authority for up to six years to investigate and discipline corruption.
Union Corruption Update has covered this two-part investigation many times (such as here and here) since it broke open in July 2017. The 400,000-member, Detroit-based United Auto Workers, though no stranger to corruption, never had experienced anything like this before. The first phase focused on the UAW’s Fiat Chrysler Department. Roughly $4.5 million had gone missing from the automaker-funded National Training Center in suburban Detroit. A number of Chrysler officials, led by Vice President Al Iacobelli, had embezzled training center funds to cover personal expenses or used such funds to bribe union officials out of raising certain issues at collective bargaining talks. The latter offense is illegal under the Taft-Hartley Act. A couple years later, in the General Motors Department phase, former UAW Vice President Joe Ashton and two other ranking union officials were charged with accepting around $2 million in contractor kickbacks to the joint UAW-GM training center involving multimillion-dollar shipments of union logo merchandise. Separately, several union officials, including former Presidents Jones and Williams, engaged in a scheme to share more than $1.5 million in embezzled UAW funds for personal use.
Criminal charges followed lengthy investigations by the FBI, the IRS and the U.S. Labor Department’s Office of Labor-Management Standards and Office of Inspector General. U.S. Attorney Matthew Schneider had been indicating for the last year that the investigations and subsequent convictions could result in federal oversight of the union. Three days ago, the hammer came down. His office filed an anti-corruption civil suit in Detroit federal court seeking equitable relief and monitoring. The action was a formality because the feds and the union already had worked out a settlement in lieu of a court trial. That same day, Schneider, accompanied by current United Auto Workers President Rory Gamble, announced the details. The agreement has three components.
First, the court will appoint an Independent Monitor possessed of the authority to investigate suspected fraud, embezzlement and other corruption, and seek sanctions against any guilty parties at a hearing before either a UAW Trial Committee or a court-appointed Independent Adjudications Officer. The oversight would last up to six years, and possibly longer if the situation warrants it. The monitor would not be involved in collective bargaining or contract administration. Thus, the agreement, while averting an outright government takeover of the sort that involved the Teamsters back in 1989, does place the union on a short leash. The UAW will nominate the Independent Monitor, subject to approval by the Justice Department and the federal court, and would bear all costs associated with that person’s work.
Second, the United Auto Workers will conduct a binding, secret-ballot referendum among members, as overseen by the Independent Monitor and the U.S. Department of Labor, to decide whether to change the union’s method of conducting presidential and executive board elections. Under the current indirect system, union delegates cast ballots. The referendum would give members the opportunity to choose to retain this system or replace it with direct, “one member, one vote” approach. The chosen method would apply beginning with the 2022 election cycle.
Third, the settlement resolves the criminal and civil probes of the UAW, and associated monetary penalties. The union has agreed to make a $1.5 million payment to the Internal Revenue Service in relation to administrative fees that the union received from the Chrysler, General Motors and Ford worker training centers. The union already has paid back more than $15 million to compensate the Chrysler- and GM-funded centers for improper chargebacks. The money will be used to promote employee health and safety.
The Justice Department and the union believe that the outcome is fair. “The men and women of the UAW deserve honest and faithful leaders dedicated to serving the best interests of the membership,” said U.S. Attorney Matthew Schneider. “Today’s settlement provides independent oversight to investigate and eliminate corruption within the union. It also brings real democratic change to the union by giving the membership the opportunity to decide for themselves whether to institute a direct election system.” Current UAW President Rory Gamble also was optimistic: “Today’s agreement builds upon the many reforms that the UAW has initiated and put in place ourselves over the past 13 months. This civil resolution brings to a close the government’s investigation and is a testament to the hard work that has been done to make the necessary structural and cultural changes.”