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Federal corruption probe hits home for UAW boss, contract talks under 'storm cloud'

[August 29, 2019] By Nick Carey

DETROIT (Reuters) - The FBI on Wednesday conducted searches at the home of United Auto Workers President Gary Jones, a union retreat and multiple other locations as part of a corruption probe into illegal payments to union officials, posing fresh problems for the union at a pivotal time.

News of the FBI action came as the UAW, a once powerful force in the organized labor movement, holds sensitive contract talks with Detroit automakers General Motors Co <GM.N>, Ford Motor Co <F.N> and Fiat Chrysler Automobiles NV (FCA) <FCHA.MI> <FCAU.N>.

The current four-year contract expires on Sept 14.

"This round of contract negotiations was always going to be very difficult, even without the shadow of a federal investigation hanging over the union," said Kristin Dziczek, vice president of industry, labor and economics at the Ann Arbor, Michigan-based Center for Automotive Research (CAR). "That shadow has just become a giant storm cloud."

Even if the FBI searches do not result in indictments, the expanded probe further undermines the confidence of rank-and-file UAW members in their union's leadership, she added.

"That could make it very difficult to ratify a new contract," Dziczek said, signaling a big potential downside for automakers as well as the union.

The FBI has been conducting a wide-ranging investigation into illegal payoffs to UAW officials by FCA.

To date, seven people linked to the union and the automaker have been sentenced in the government's corruption investigation.

A former union official who represented the UAW at GM has also recently been charged with wire fraud.

The office of the U.S. Attorney in Detroit said the raids on Wednesday included the home of current UAW President Gary Jones in the western suburb of Canton.

A source familiar with the investigation said a raid had also been conducted on a residential address in Corona, California. Public records list former UAW President Dennis Williams and his wife as the owners.

FBI spokeswoman Mara Schneider said the agency had executed search warrants at six locations in Wisconsin, Missouri, Michigan and California in connection with the probe, including at a regional UAW office in Missouri.

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AW President Gary Jones (L) shakes hands with Ford Motor Co Chairman Bill Ford at the start of contract talks between the union and the automaker in Detroit, Michigan, U.S., July 15, 2019. REUTERS/Nick Carey/File Photo

Throughout the two years since the corruption probe became public, the UAW and FCA have insisted that the illegal payment scheme involved just a few bad actors.

Jones, a certified public accountant, was elected president last year. Previously based in Kansas City, Missouri, as a regional director for the union, he was seen as an outsider who could help the organization move past the payments scandal.

But federal prosecutors have aggressively expanded the corruption probe.

The investigation itself was used by opponents of the UAW in a successful effort in June to block the union from representing hourly workers at Volkswagen AG's <VOWG_p.DE> assembly plant in Chattanooga, Tennessee. The FBI said it was also conducting searches at the UAW's Black Lake retreat in northern Michigan and multiple other locations.

The UAW declined to comment on the raid on Jones' home.

But in a statement, the union said it has always "fully cooperated" with investigators in the corruption probe.

"There was absolutely no need for search warrants to be used by the government today - the UAW has voluntarily responded to every request the government has made throughout the course of its investigation," the union said.

This year's contract talks were already expected to be contentious as U.S. new vehicle sales slow and automakers gear up to launch more electric vehicles, with healthcare costs, absenteeism and profit sharing expected to be major sticking points.

Instead of focusing on which automaker the union would target first to conclude a contract - always a significant step in the negotiation process - both sides are now watching to see what emerges from Wednesday's raids.

(Additional reporting by Scott Malone, Ben Klayman and David Shepardson; Editing by Tom Brown)

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