Federal oversight of UAW an option, top prosecutor says

Robert Snell | The Detroit News

Show Caption Hide Caption U.S. Attorney Matthew Schneider on the ongoing UAW case U.S. Attorney Matthew Schneider talks about the ongoing corruption case involving leaders of the UAW

Detroit — Federal oversight of the United Auto Workers is an option once government investigators determine the depths of corruption within one of the nation’s largest and most powerful unions, U.S. Attorney Matthew Schneider told The Detroit News.

In a rare interview about the years-long UAW scandal, Schneider said government oversight of the UAW is a possible solution to reforming a union plagued by what his team of prosecutors has called a culture of corruption among senior leadership. Prosecutors could seize control by filing a civil racketeering lawsuit, a move that could cost the union tens of millions of dollars, impose prolonged federal oversight and involve replacing labor leaders.

Schneider also revealed his displeasure with the UAW’s lack of cooperation, disclosed that a four-year investigation is perhaps only halfway completed, and said he was unimpressed with reform efforts announced in mid-November by acting UAW President Rory Gamble. His comments marked the first time Schneider has addressed the possibility of imposing federal oversight of the UAW, a move the government made 30 years ago in settling a racketeering lawsuit against the International Brotherhood of Teamsters.

“That shouldn’t be taken off the table,” Schneider told The News on Nov. 25. “Now is not the time to go lax on this. We’ve been living through this (investigation) for years. Now isn’t the time to say ‘we’ll have some moderate reforms.’ No, we need significant reforms.”

Pushing for federal oversight of the UAW is "a little premature," he said. "We need to work through these criminal cases before we determine how we are going to go forward."

Schneider spoke two weeks after Gamble unveiled the UAW's third attempt at reforming a labor organization embroiled in an investigation that has uncovered a nationwide pattern of corruption within the senior ranks of the union. That includes labor leaders receiving bribes and kickbacks, embezzling member dues and, according to prosecutors, obstructing justice.

The reforms include appointing an independent ethics officer, strengthening internal financial controls, appointing an independent ethics officer and selling a lakefront home built for former President Dennis Williams.

"I'm not impressed with what we've seen so far," Schneider said. “We’ve seen reforms in the past. We’ve seen that they’re saying that they’re reforming. I don’t think that means that they’re cooperating with the Justice Department so we can bring justice to the victims who are the UAW members, so far. If they’re going to have reforms, these have to be genuine reforms.”

"We can’t get to the bottom of this and we can’t fully return the UAW to the workers unless everybody's on board," he added. "And that includes the leadership."

UAW spokesman Brian Rothenberg defended the union's reforms.

“After just three short weeks under Acting President Rory Gamble, the UAW has instituted a series of important reforms and has said he is open to making whatever other changes may be necessary to restore trust and confidence in the union," Rothenberg wrote in a statement to The News on Sunday. "In fact, on Monday we will announce significant accounting changes and financial controls that will tighten up our procedures and prevent future misfeasance.

"The UAW continues to cooperate in turning over any and all records requested by the federal government," Rothenberg added.

Schneider is delivering an unmistakable message, said Peter Henning, a Wayne State University law professor and former federal prosecutor: "Don't mess with us unless you want to face a civil racketeering suit. The UAW does not want to face that. It essentially would remove all of the top leadership and put the government in charge.

"This is a little poke in the side to get the UAW to move," Henning added.

A team of federal agents from the FBI, Labor Department and Internal Revenue Service has spent at least four years conducting an investigation that has produced charges against 13 people and implicated former Fiat Chrysler Automobiles CEO Sergio Marchionne and ex-UAW presidents Gary Jones and Williams.

The Schneider interview came five days after the resignation of Jones, who ordered workers to strike General Motors Co. this fall in what some legal and labor experts called a move designed to distract from the corruption investigation. Jones ordered the 40-day strike after The News publicly implicated him in what prosecutors called an embezzlement scheme.

The News identified Jones as the unnamed UAW leader accused of helping orchestrate a conspiracy that involved embezzling more than $1 million in member dues and spending the money on personal luxuries, including private villas, golf and expensive liquor.

"When the UAW goes on strike and the workers are making — I think it was $275 per week... And what does the leadership get? Bottles of booze worth $1,300. Lavish steak dinners. They are literally using the workers' money to live so high on the hog," Schneider said. "The leadership is stealing their money. That's unconscionable."

The UAW represents about 1 million active workers and retirees nationwide.

Gamble has served as acting UAW president since Jones went on paid leave Nov. 3. In a meeting expected to be held this week, the union's executive board must vote on a permanent replacement to finish Jones' four-year term that ends June 2022.

Schneider pointed to Detroit's municipal bankruptcy as offering a possible template for providing oversight of the UAW. The city emerged from the largest municipal bankruptcy in American history in 2014 with a financial review commission that oversaw Detroit's recovery.

"The pension board had to be overhauled and a new entity was created to make sure the trustees, the people who were in charge of pension investments, were qualified and had the proper backgrounds, that there were no conflicts of interest," said Schneider, who as chief legal counsel for the state Attorney General's office that represented Gov. Rick Snyder and the state during the Detroit bankruptcy. "That could be a possible model.

"Government oversight is another possibility," he added.

Schneider's comments are the latest public sign of tension between the UAW and Justice Department. In August, federal agents raided six locations in four states, including the homes of Jones and Williams as well as the UAW's northern Michigan retreat on Black Lake.

At the time, the UAW spokesman called the federal action unnecessary and said the union had "fully cooperated" with investigators.

"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, produced literally hundreds of thousands of documents and other materials to the government, and most importantly, when wrongdoing has been discovered, we have taken strong action to address it," Rothenberg said in August.

The UAW's statement was contradicted by federal court records that portray Jones and other union leaders as obstructing the investigation. The alleged obstruction was outlined in October when prosecutors charged UAW officer Edward "Nick" Robinson, accusing him of embezzling as much as $700,000 in member dues and splitting the money with Jones.

The court filing quotes conversations involving Jones and Robinson, a strong indication that investigators have secret recordings obtained via a wiretap or undercover device.

Jones is not identified in court records. Instead, investigators refer to "UAW Official A," whom sources say is Jones. UAW Official A and Robinson met in March and talked about whether the government had obtained documents from the UAW and hotels involved in the embezzlement scheme, prosecutors said.

"UAW Official A told (Robinson) that he wished they 'burned the records,'" prosecutors wrote.

During the same meeting, Jones reiterated he would provide for the financial well-being of one of Robinson's relatives if Robinson took sole responsibility for the cash embezzlement, prosecutors wrote.

"We'll take care of (the relative)," Jones said, according to the court filing. "I told you that we'd take care of it."

Jones resigned Nov. 20. The UAW's lack of cooperation has continued since the raids, Schneider said, including when the UAW moved the same day to expel Jones from the union under Article 30 of the UAW constitution.

The UAW's governing executive board, which includes Gamble, released a list of accusations against Jones. One new allegation was that Jones allowed his daughter to stay for one week in a townhouse paid for by the UAW.

While not referencing the townhouse allegation specifically, Schneider said the list contained information that had not been shared with investigators: "This details wrongdoing. And this was not reported to us. And so what we would ask, if we want true reform at the UAW, we want cooperation from the UAW just as we request from any other citizen of this state.

“If you see something, say something. And if you see something that is corrupt at the UAW, we’d like to know about it, because holding back is harmful to the men and women who are working at the UAW. We would have preferred to have known before so we could take action.”

Schneider, a Republican appointed by President Donald Trump, also responded to criticism that the prosecution is political and designed to harm a union closely linked to the Democratic party.

“Well, I am a Republican. But I didn’t take the lavish golf trip. I didn’t get the first-class airfare that was really deserved for the hard-working men and women of the union," Schneider said. "I did not take the shotgun or the valuable materials. That’s the leadership of the UAW doing that."

The investigation started during the administration of U.S. Attorney Barbara McQuade, a President Barack Obama appointee.

“So, look, I grew up working in a factory in the city of Saginaw. I’ve put a lot of miles driving a forklift truck," he added. "I’ve worked in factories. That’s why it’s so frustrating to me to see the leadership of folks not serving (members) appropriately.”

rsnell@detroitnews.com

Twitter: @robertsnellnews