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U.S. Probe Into UAW Eyes GM — WSJ | #employeefraud | #recruitment | #corporatesecurity | #businesssecurity | #


By Ben Foldy, Nora Naughton and Christina Rogers

Federal investigators probing corruption at the United Auto Workers union have also been looking at General Motors Co.’s dealings with UAW officials, reflecting a newer front in the yearslong criminal investigation.

Agents have interviewed both current and former GM employees within the company’s labor relations department and raised questions about interactions between GM’s top bargainers and their counterparts at the UAW, say people with knowledge of the inquiry.

Investigators have also subpoenaed records from the company’s now-closing employee training center, an entity GM had jointly operated with the UAW for decades, according to a training center email sent to staff in February and people familiar with the matter.

The investigators have requested documents related to financial transactions, charitable donations, vendor contracts and travel spending, according to some of the people and the email, which was reviewed by The Wall Street Journal.

The subpoenas cover documents spanning from 2005 to July of 2019, the email specifies.

The Detroit-based training center, also known as the GM-UAW Center for Human Resources, is being shut down this year, after the company and union agreed to unwind it during contract talks last fall.

The center is a focus of the GM inquiry, with investigators looking at certain practices, such as payments the center made for travel and credit-card spending for UAW officials and allegations that relatives of union leaders were given preference for staff jobs, say people close to the investigation.

Federal authorities are trying to determine whether GM, in its dealings with UAW, violated U.S. labor law barring companies from providing union officials with items of value, some of these people say.

GM in a statement said the federal investigation “has made it clear that the [training center] and the people it served were victimized by corrupt former union officials” and said it has been cooperating with the government for nearly three years.

The UAW said in a statement it is cooperating with investigators and reiterated its recent efforts to reform, including stronger financial controls and the hiring of an ethics officer.

The training center, which included both GM executives and UAW leaders on its executive board, was also at the heart of a kickback scheme that resulted in several guilty pleas over allegations UAW officials shook down vendors in return for contracts.

Matthew Schneider, U.S. Attorney for the Eastern District of Michigan, in an interview with The Wall Street Journal in December, said: “Our primary focus is on any unlawful activities or wrongdoing, whether that’s by a corporate entity, a union or by individuals.”

Federal investigators’ interest in GM, details of which haven’t been previously reported, is part of a sprawling investigation that has penetrated the UAW’s top ranks and has led to 13 convictions for offenses ranging from bribery and money laundering to embezzlement of union dues. The investigation involves the Justice Department, Labor Department and the Internal Revenue Service.

Prosecutors earlier this year charged the union’s former president, Gary Jones, with a scheme to embezzle more than $1 million in worker dues. Mr. Jones declined to comment through his attorney.

The federal probe, first made public in 2017, had initially focused on misuse of funds for a similar employee-training center operated jointly by the UAW and rival Fiat Chrysler Automobiles NV.

Federal prosecutors say they uncovered evidence Fiat Chrysler tried to buy “labor peace” by spending the training center’s funds on union leaders in a scheme to keep labor leaders “fat, dumb and happy.”

That leg of the investigation has led to convictions of Fiat Chrysler’s former head of labor relations, as well as several UAW officials. Fiat Chrysler has said the misconduct was limited to a small group of people acting in their own interest.

Last fall, GM cited the investigation as a basis for filing its own civil racketeering lawsuit against Fiat Chrysler, alleging its crosstown rival gained a labor-cost advantage by bribing UAW officials for more favorable contract terms during bargaining.

GM’s lawsuit accuses Fiat Chrylser of using the alleged scheme, and its relationship with top UAW officials, to weaken GM’s position and press a merger of the two companies.

Fiat Chrysler has fought the lawsuit, which it called meritless.

Both GM and Fiat Chrysler established their training centers in the 1980s as nonprofits with a mission to train UAW factory workers for more technology-intensive jobs. Ford Motor Co. also created its own similar training center.

The centers were largely funded by the companies with each center amassing tens of millions of dollars in contributions in recent years through a formula determined by the collective bargaining agreements, tax documents show. UAW officials and company executives sat on the centers’ governing boards and operated the facility jointly.

GM’s training center has long been the best-funded of the Detroit car companies’, receiving an average of about $50 million annually over the past decade, according to recent tax documents.

Fiat Chrysler, like GM, is disbanding its training facilities, a decision agreed to during labor talks late last year. Ford’s center, known as the UAW-Ford National Programs Center, remains in operation.

The decision to shutter Fiat Chrysler and GM’s training centers is part of a larger effort to restructure joint programs with the companies to allow for more transparency and stronger financial controls, a UAW spokesman said.

Last year, federal prosecutors charged former UAW Vice President Joe Ashton and two aides with a kickback scheme involving the GM training center’s vendors. Prosecutors say Mr. Ashton and the aides demanded kickbacks in return for steering more than $10 million worth of contracts for providing backpacks, jackets and watches intended for GM workers.

Mr. Ashton, also a former GM board member, pleaded guilty to charges of conspiracy to commit fraud and money laundering late last year.

Investigators are probing whether GM employees were aware of the kickback scheme, and to what extent training-center staff raised questions internally about certain vendor contracts, some of the people close to the investigation said.

Write to Ben Foldy at Ben.Foldy@wsj.com and Christina Rogers at christina.rogers@wsj.com

 



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