CHRYSLER

Prosecutor: Corruption case involving FCA might be unmatched in U.S. history

Eric D. Lawrence
Detroit Free Press

The merger that formed Stellantis in January created the world's fourth-largest automaker, but it didn't erase a scandal that saw millions of dollars in prohibited payments and lavish goodies flow from former Fiat Chrysler Automobiles executives to UAW officials.

The company's U.S. operating arm, formally known as FCA US and a member of the Detroit Three automakers, was ordered Tuesday to pay $30 million and submit to a compliance monitor for three years for its role in the years-long scandal, which prosecutors have said was an attempt to warp the labor-management relationship.

FCA, which will be on probation for three years but will not have to pay restitution, pleaded guilty in March to one count of conspiring to violate the Labor Management Relations Act. 

Assistant U.S. Attorney Erin Shaw told Judge Paul Borman during the sentencing in Detroit via Zoom that the company's guilty plea to a felony is significant because many corporate cases end in deferred prosecutions. In fact, the severity of this case might be unmatched, she said, noting that the company employs tens of thousands of workers in the United States and sells millions of vehicles under the Chrysler, Dodge, Jeep and Ram nameplates.

“We’ve been informed by our colleagues at the Department of Labor in Washington that this case marks one of the largest violations of the Taft-Hartley Act in United States history, if not the largest," Shaw said, referencing a law governing union and company activities. "The criminal conduct by FCA and its executives has significantly undermined the confidence and trust that the men and women working in the plants and on the assembly lines hold in their leaders. These crimes have also undermined the workers' trust in the integrity of the collective bargaining process.”

And in rejecting early claims that those involved were simply bad actors, Shaw said this was “not the act of a rogue or low-level employee at FCA, and it is abundantly clear that there is a significant problem with the culture at this company in years past.”

The company had initially claimed it was "a victim of illegal conduct by certain rogue individuals," and Sergio Marchionne, the late FCA CEO, had told employees in a letter that he joined then-UAW President Dennis Williams in "expressing my disgust" at the alleged conduct, "which constitutes the most egregious breach of trust by the individuals involved."

Years later, now-former U.S. Attorney Matthew Schneider would be asked about the possibility of charges against Marchionne, the man usually credited with saving both Fiat and Chrysler, but Schneider would simply say that prosecutors do not charge or indict dead people.

In a brief statement to the judge, Nicolas Bourtin, an attorney representing the company, said the plea agreement was negotiated at length with the government and includes an extensive factual statement, with which the company agreed.

“For all the reasons put on the record at the guilty plea hearing, we believe it is an appropriate resolution and the court should accept it as it is done," Bourtin said.

Erik Gordon, a professor at the University of Michigan's Ross School of Business who has watched the case for years, has been critical of the fine amount, calling it miniscule for a corporation the size of Stellantis. However, he has also said it matters that the company's position changed.

"If a company denies what it later admits, if it tries to wiggle out of what it actually did, when it finally admits to the wrongdoing, you have to wonder if their only regret is that they weren’t able to get away with it," Gordon has said.

The sentence marked the conclusion of one piece of the federal probe that led to charges against 15 people, including the onetime lead labor negotiator for FCA, Alphons Iacobelli, and two ex-UAW presidents, Gary Jones and Williams. The case against one of those charged, ex-union official Jeff Pietrzyk, was dismissed because he died in April.

The scandal showcased the different lives some union brass and auto executives lived when compared with rank-and-file workers. People working in the company's interest used a worker training center, jointly overseen by FCA and the UAW, to funnel payments to union officials. Meals, parties, clothing, golf, even the $262,000 mortgage of the late General Holiefield, a UAW vice president in charge of the union's Chrysler department, were on the list of items paid for with misused funds, according to prosecutors.

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The scandal tainted the UAW's image, but the union avoided a federal takeover. Instead, an independent monitor has been assigned to the union to oversee an upcoming referendum election to decide how union members should select their top leaders in the future and investigate possible corruption.

The compliance monitor selected for the company by the government is Frances McLeod, founding partner of Forensic Risk Alliance. McLeod's team includes experts in labor law and automotive regulatory compliance, and McLeod served as compliance monitor for Germany's IAV GmbH, which was prosecuted in connection with the Volkswagen emissions scandal, according to a statement from the U.S. Attorney's Office in Detroit.

Despite the sentencing, the company's legal headaches are not at an end. A lawsuit filed by General Motors remains before the U.S. 6th Circuit Court of Appeals after being dismissed at the district court level. GM claims FCA tried to corrupt the contract bargaining process in order to force a merger with GM, which did not ultimately happen.

FCA has called the case meritless.

In a decision related to FCA's sentencing, the 6th Circuit on Tuesday denied a petition from 167 current and former FCA employees seeking crime-victim status and restitution from the company, which had been denied by Borman in July. 

Contact Eric D. Lawrence: elawrence@freepress.com. Follow him on Twitter: @_ericdlawrenceBecome a subscriber.