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Judge approves $30M fine against Fiat Chrysler in union bribery case

Prosecutors say the multinational automaker’s violations of U.S. labor laws are some of the most egregious in American history.

DETROIT (CN) — A federal judge on Tuesday approved a $30 million fine and three years of probation for the disgraced automaker formerly known as Fiat Chrysler, closing the chapter on a sprawling corruption case over executives bribing United Auto Workers officials to cajole them into making concessions in negotiated labor agreements.

U.S. District Judge Paul D. Borman signed off on a plea agreement first announced in January during a hearing in Detroit federal court, saying the sentence recognizes a pattern of similar behavior from FCA and is intended to deter other corporations in the future.

The multinational automaker, now known as Stellantis after a merger with PSA Group in 2020, is the fourth largest automobile manufacturer in the world, with 14 different brands under its corporate umbrella.

Under the terms of the plea deal, the company will pay the $30 million fine and has agreed to employ an independent compliance monitor for three years.

At Tuesday's hearing, Assistant U.S. Attorney Erin Shaw said there was no confusion over what transpired.

“It is now undisputed that FCA conspired to violate the Taft-Hartley Act by making more than $3.5 million in illegal payments to UAW officials over a seven-year period,” she said. “This court has seen firsthand how FCA executives passed millions of dollars to UAW officials through the training center.”

Alphons Iacobelli, former vice president of FCA US, was behind several deals, according to federal documents. In June 2014, he authorized a $262,000 payment to UAW Vice President Gerald Holiefield so he could pay off his mortgage. In early 2015, Iacobelli allowed UAW members to spend $30,000 on restaurants in Palm Springs and southern California. Holiefield also allowed his girlfriend to charge more than $30,000 for airline tickets with credit accounts from the UAW-Chrysler National Training Center, even though she never worked for the company or the union.

Shaw noted that the company is changing its culture but said the violations were historic.  

“We are pleased that FCA has agreed to accept responsibility for its conduct and appears to be committed to making reforms,” she said.

She added, “We’ve been informed by our colleagues in Washington that this case marks one of the largest violations of the Taft-Hartley Act in United States history, if not the largest.”

According to the agreement, the monitor can be dismissed in less than three years if the company complies with all mandates, including the dissolution of its existing training center and establishment of an updated entity to replace it. The monitor is only required to review labor-management relations and is not expected to conduct a comprehensive audit of all business lines.

The monitor will issue a written report within 60 days and will be required to submit at least two follow-up reports that will grade the company on its compliance. An initial review presented to the company’s board of directors will be scheduled within four months of the monitor’s placement.

Nicholas Boutrin of Sullivan and Cromwell LLP represented FCA US at Tuesday's hearing and agreed the sentence was fair.

“The deal was negotiated at length with the government…We believe it is an appropriate resolution,” he told the judge.

Federal prosecutors were unable to convince Borman, a Bill Clinton appointee, that the 234 individual plaintiffs they claim to represent should qualify as crime victims and receive additional restitution under federal law.

Borman rejected prosecutors' motion claiming that both the government and FCA acknowledged the direct victims of the bribery scheme were FCA employees, based on his ruling in a dismissed case brought by General Motors.

“That is not correct,” he wrote in an order last month. “FCA stated, ‘if at all’ there was any direct first step harm, it would not be GM, but FCA workers. And this court stated that the only potential inference from the facts in GM's complaint is that if there were any direct victims of defendants' alleged bribery scheme, it would not be GM, but FCA's UAW workers. Thus, the court did not, as plaintiff's assert, hold in its opinion in GM v. FCA, that FCA's UAW employees were victims of the alleged bribery scheme.”

GM brought its federal lawsuit against FCA in November 2019, claiming 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.

Borman disagreed, however, and dismissed the case last year. It is now in the hands of a federal appeals court.

Gary Jones, the former UAW chief, was charged with conspiring with other top UAW officials to arrange kickbacks and siphon over $1 million of union money to fund his luxurious lifestyle. Borman sentenced Jones to 28 months in prison plus two years of supervised release in June, based on a plea agreement with prosecutors.

Iacobelli, the company’s chief labor negotiator, recently had a 66-month prison sentence reduced to 48 months for cooperating in the case.

The accusations triggered aftershocks of litigation when the scheme became public. In one case, former Jeep Wrangler paint shop workers sued FCA and UAW, claiming they were forced out of their northwest Ohio paint shop after union officials bargained away jobs for bribes.

Media representatives for Stellantis and UAW did not return a request for comment by press time.  

Last Friday, the UAW shared interim rules for an upcoming vote on a referendum that will determine how members will select the union’s international governing board. In the past, delegates elected by local unions have chosen the 13 members of the executive board, but the referendum will ask union members if that should be amended to use a direct voting system in order to hold leaders more accountable.  

Neil M. Barofsky of Jenner and Block LLP, the court-appointed monitor for the UAW, will oversee the voting process. Barofsky did not respond to a request for comment on the sentencing.

Follow Andy Olesko on Twitter

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