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GM Sues Fiat Chrysler Over Bribery of Union Officials

General Motors brought a federal lawsuit Wednesday against Fiat Chrysler, claiming the rival automaker bribed officials with the United Auto Workers union to get an unfair advantage in labor agreements.

DETROIT (CN) – General Motors brought a federal lawsuit Wednesday against Fiat Chrysler, claiming the rival automaker bribed officials with the United Auto Workers union to get an unfair advantage in labor agreements.

According to the complaint filed in Detroit federal court, Fiat Chrysler Automobiles, or FCA, “embarked on a systemic and near decade-long conspiracy to bribe senior union officials to corrupt the collective bargaining process and labor relations,” specifically targeting officials with the UAW.

GM claims that the Italian-based car company paid millions of dollars to UAW officials in exchange for “benefits, concessions, and advantages for FCA in the negotiation, implementation, and administration of the collective bargaining agreements between FCA and the UAW.”

The bribery scheme, GM claims, was authorized by FCA’s top brass, including now deceased CEO Sergio Marchionne and former vice president Alphons Iacobelli, who is currently serving a five-year prison term in Michigan after federal prosecutors accused him of showering union leaders with gifts and cash.

Named as defendants in the lawsuit are FCA, Iacobelli, former company controller Jerome Durden and Michael Brown, FCA’s former director of employee relations. Brown and Durden were sentenced to 15 months and one year and a day in prison, respectively, after pleading guilty to their roles in the bribery scheme.

Also on Wednesday, UAW President Gary Jones abruptly stepped down amid efforts to force his removal. The union’s internal board had filed paperwork to expel him over the allegations of corruption raised in the federal investigation. The board also tried to oust Regional Director Vance Pearson for the same reasons. His current status with UAW is unclear.

GM is represented in Wednesday's suit by Jeffrey Lamb with the Detroit office of nationwide firm Honigman and Hariklia Karis from the Chicago office of nationwide firm Kirkland & Ellis.

The complaint claims that between 2009 and 2017, FCA bribed UAW officials in part to influence negotiations of collective-bargaining agreements in 2009, 2011 and 2015, and to control the day-to-day implementation of the agreements, which GM says was done to unfairly benefit FCA.

The bribery began shortly after Fiat purchased a majority interest in Chrysler in 2009, which declared bankruptcy that year in the aftermath of the financial crisis spurred by the collapse of America’s housing market, the complaint states.

One month after Chrysler declared bankruptcy, Fiat’s officials began paying hundreds of thousands of dollars to General Holiefield, who at the time was the head of the UAW’s Chrysler branch, including large donations to Holiefield’s charity and a custom-made watch worth several thousand dollars. The lawsuit also claims FCA paid for Holiefield’s wedding in Venice, Italy.

Beginning in July 2009, FCA allegedly began funneling bribes to other UAW officials through a training center run jointly by FCA and UAW, which GM says was done to keep them “fat, dumb, and happy” and to “buy labor peace,” all the while concealing the payments via various forms of mail fraud and wire fraud.

The scheme paid off for FCA. For example, the company was able to dramatically cut its labor costs because the UAW allowed it to hire more temporary workers in lieu of standard hourly workers in exchange for bribes, according to the complaint.

Holiefield, who died in 2015, laundered the bribe money in a variety of ways in concert with his wife, including through front businesses and Holiefield’s charity, the lawsuit states. It also alleges they spent the money on “fancy clothes, nightclubs and restaurants” as well as an in-ground pool.

All told, GM claims its competitor delivered more than $1.5 million in prohibited payments and things of value to UAW’s officers and employees.

GM alleges it was denied the favor FCA enjoyed due to its bribery, including the commitment of a direct partnership with the UAW and the latitude to bypass ordinarily rigid union rules and hierarchies.

The complaint states that the corruption got to the point where FCA attempted to force GM into a merger starting in 2014, effectively scheming to take over the automaker through a clandestine project code-named “Operation Cylinder.” The secret deal was never consummated, and the complaint alleges the deal’s failure was a regret Fiat’s former CEO “took to the grave.”

The lawsuit alleges FCA’s actions constitute violations of the Racketeer Influenced and Corrupt Organizations Act and the Taft-Hartley Act, among other claims.

Wednesday’s complaint did not specifically name the amount of money GM is seeking, but it did not rule out damages exceeding the billions of dollars it claims to have suffered as a result of the bribery scheme and pattern of racketeering.

FCA could not be reached for comment Wednesday afternoon.

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Categories / Business, Employment, Government

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