By David Shepardson, Ben Klayman
WASHINGTON/DETROIT (Reuters) - The U.S. Attorney’s Office in Detroit said Monday the United Auto Workers (UAW) union has agreed to independent oversight to resolve a five-year federal corruption investigation that ensnared two former UAW presidents.
U.S. Attorney Matthew Schneider said the UAW would pay $1.5 million to settle tax issues, make significant reforms and be overseen by an independent monitor for six years. Schneider said the civil settlement caps the investigation into the union but said inquiries could continue against individuals.
"The union has had a problem with fraud, embezzlement and corruption," Schneider told a press conference. "There are a few bad apples and those people have been convicted."
He added that UAW International President Rory Gamble, who was present, was not under investigation.
The U.S. attorney’s office revealed for the first time that the UAW has already paid back over $15 million for improperly billing Ford Motor Co and Fiat Chrysler Automobiles (FCA) for employing members who did not work at the training centers operated by the union and the companies.
Schneider’s office has charged 15 former UAW officials as part of its investigation, and former presidents Gary Jones and Dennis Williams both have pleaded guilty to embezzling union funds.
"The UAW failed to address the fraud, corruption, and illegality problem within its own ranks and necessitates injunctive relief to protect the honest membership of the organization," the government said in its complaint filed Monday that must be approved by a federal judge.
The monitor has power to investigate, audit and review all aspects of UAW other than collective bargaining agreements.
"This agreement is yet another step towards restoring the full faith and confidence of our members in our union and its leadership," Gamble said.
Several UAW officers, including the two former UAW presidents, have pleaded guilty to embezzling millions of dollars for their personal benefit, using the funds to purchase expensive liquor and cigars and to pay for golfing outings and related equipment, and to stay at expensive hotels.
The government said for over a decade UAW officials "engaged in fraudulent, corrupt, and illegal conduct for their own benefit."
The UAW represents about 400,000 U.S. workers, including workers at Detroit’s Big Three automakers and in other fields. At its peak in 1979, the union had a membership of some 1.5 million.
The UAW agreed to conduct a binding secret-ballot referendum of its membership to determine whether to change the UAW’s election method from the current delegate system to a direct election model.
U.S. Labor Secretary Eugene Scalia said "a criminal element within the UAW recently betrayed these members’ trust, engaging in bribery, kickback, and embezzlement schemes totaling millions of dollars."
Gamble was appointed president in November 2019 when his predecessor Jones was forced out after being linked to the corruption inquiry. Gamble promised he would overhaul the UAW, and previously announced a series of ethics reforms, including increased financial oversight of the union’s accounting department.
In 1988, the U.S. Justice Department sued to force out senior leaders at the International Brotherhood of Teamsters union and appointed a trustee because of the union’s connection to organized crime. The government oversaw the Teamsters from March 1989 until 2015, and a five-year transition period ensued.
The FBI has been investigating allegations of illegal payoffs to UAW officials by FCA.
That inquiry led to rival automaker General Motors Co filing a lawsuit against FCA last year, accusing the Italian-American company’s executives of bribing UAW officials to secure labor agreements that put GM at a disadvantage.
In the Monday complaint, prosecutors referred to illegal payments made by FCA officials to gain labor concessions from the union. GM officials declined to comment other than to say it supported efforts to eliminate corruption in the UAW.
(Reporting by Ben Klayman in Detroit and David Shepardson in Washington; Editing by Mark Heinrich and Lisa Shumaker)