Although it’s unlikely a probe by the US Justice Department, the US Labor Department and the US Internal Revenue Service into relations between GM and the United Auto Workers Union (UAW) will reach the top floor at Detroit’s Renaissance Centre; all the same, I think Mary Barra and her lieutenants should be calling in their personal lawyers.
For decades activities involving GM personnel and union officials and linked with the UAW-GM Centre for Human Resources, have been on the radar at the three departments over suspected illegal activities, according to a report in the Wall Street Journal.
The sprawling Centre sits on 420,000 acres on the banks of the Detroit River, and was established in the 1980s. When the property eventually comes to market, the sale will benefit both GM and UAW. It is in a prime location, and is one of three centres throughout the United States operated jointly by GM and the UAW.
Membership of the UAW has been steadily declining. From a peak in 1979 of 1.5 million members, it now represents less than 390,000 (2010), with more than 600,000 retired members, surviving on hugely inflated Medical and Pension plans, often described by US financial analysts as being a significant cause of financial difficulties suffered by the 'Big Three' prior to the GFC.
Now the latest probe has deepened, suggesting serious corruption has been covered up by both sides for decades. The investigation centres on the teams (from GM and the UAW), which are responsible for negotiations over wages and conditions for all UAW employees employed by GM.
Federal law prevents US companies from providing unions with items of value, however even the current investigations have uncovered possible fraud in the Centre’s involvement with financial transactions, charitable donations, vendor contracts and travel and entertainment spending.
It was announced this week that GM and the UAW have agreed to shut down the Detroit Centre, after both parties agreed to the decision during the most recent contract talks last (Northern) autumn.
The focus of the new line of enquiry involves a variety of practices, such as payments the Centre made for travel and credit card spending for UAW officials, and allegations that relatives of union leaders were given preference for staff jobs.
For its part GM says it will co-operate, as it has been doing for the last three years, and says the Centre and the people it served were, ‘victimised by corrupt former union officials’.
|Former UAW official Mike Grimes after pleading guilty to wire fraud.|
The recent upshift in the intensity of the new probe is part of a wide-ranging investigation which penetrated the UAW’s top echelon, leading to 13 convictions for a range of offences including bribery, wire fraud and money laundering, to embezzlement of union dues.
A former United Auto Workers union official who received bribes and kickbacks from a vendor has been sentenced to 28 months in prison.
Mike Grimes of Fort Myers, Florida was accused of receiving more than $1.5 million in bribes, including $10,000 worth of cosmetic surgery for a relative while working at the UAW-General Motors training center. Grimes, 66, pleaded guilty in September 2019 to wire fraud, money laundering and conspiracy charges.
One of the leading investigators said: “Our primary focus is on any unlawful activities or wrongdoing, whether that’s by a corporate entity, a union, or individuals.’
One thing I know for certain, after many years of living and working in the USA, is that once the Internal Revenue Service becomes involved in investigating your enterprise, look out!
When the IRS gets its fiduciary microscopes out, this can only end in tears!
PS: They’re All At It!
General Motors filed a federal lawsuit against Fiat Chrysler in November 2019, alleging its rival bribed UAW officials to secure an unfair advantage in labor talks, and to force GM to agree to a merger.
The lawsuit points a finger at the late Sergio Marchionne, FCA's former chief executive, accusing him of being a central player in a conspiracy with corrupt United Auto Workers officials to support a tough contract on GM that would then force GM into a merger with FCA.
It references guilty pleas by former FCA executives, who bribed former UAW officials, in a long-running case involving a UAW employee training program at both FCA and GM, that has tarnished the union's image.