UAW board member charged with embezzling union funds

DETROIT -- Senior UAW officials stole hundreds of thousands of dollars in union money to spend on luxury villas in Palm Springs, Calif., cigars, liquor, lavish meals, golf and other extravagances, federal authorities said Thursday after arresting one of the union’s board members on conspiracy and embezzlement charges.

Vance Pearson, a 17-year UAW employee who succeeded President Gary Jones as Region 5 director in Missouri last year, is among the current and former officials cited in an investigator’s affidavit as authorizing and concealing union-funded purchases of “luxury items and accommodations for their own personal benefit.” 

Pearson, 58, is one of the few officials that prosecutors identified by name, as the others have not yet been charged with any crimes.

But late on Thursday The Detroit News, citing three sources, reported that Jones and former UAW President Dennis Williams are two of the four unnamed union officials implicated in the latest criminal complaint. Jones is "UAW Official A" in the detailed 39-page complaint and Williams is "UAW Official B," the newspaper reported. Two other former union officials are identified as "C" and "D" in the complaint. 

The documents cite cooperation from several unnamed witnesses who were already prosecuted or cut deals with the government in the ongoing investigation and that "UAW Official C" provided evidence in exchange for an agreement not to use the evidence against the official.

A lawyer for Jones could not be reached for comment by the newspaper or by Reuters. 

“Our highest priority is maintaining the trust and confidence of United Auto Worker members," the UAW said in a statement issued late Thursday afternoon. "While these allegations are very concerning, we strongly believe that the government has misconstrued any number of facts and emphasize that these are merely allegations, not proof of wrongdoing. Regardless, we will not let this distract us from the critical negotiations underway with GM to gain better wages and benefits for the more the 400,000 members of our union.”

GM issued an emailed statement on Thursday saying it was “outraged and deeply concerned.”

“These serious allegations represent a stunning abuse of power and trust,” the automaker said. “There is no excuse for union officials to enrich themselves at the expense of the union membership they represent.”

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The new allegations emerged two days before the UAW’s contracts with the Detroit 3 automakers are set to expire and paint a gaudy picture of the union’s “upper echelon” living it up on members’ dues for months at a time under the auspices of attending conferences and participating in other business-related activities.

“UAW officials, including Pearson, and others would spend weeks and/or months living in Palm Springs enjoying an extravagant lifestyle paid for with UAW funds,” Andrew Donohue, a special agent with the labor racketeering and fraud unit of the U.S. Department of Labor’s inspector general’s office, said in the affidavit.

Donohue’s affidavit says agents seized golf clubs, cash and other items from the homes and offices of Pearson and other UAW officials during a series of raids in August. Jones’ home in the Detroit area was among those searched by the agents, though Jones is not mentioned by name in the affidavit. The golf clubs seized matched the descriptions of clubs that were purchased with union funds in Palm Springs and Coronado, Calif., and in Missouri’s Lake of the Ozarks resort area, Donohue said.

The officials submitted fraudulent expense reports claiming the spending was related to Region 5 leadership conferences held from 2014 through 2018 in order to get reimbursement, Donohue said. Jones was director of Region 5 from October 2012 through June 2018, when he succeeded Williams as president of the union.

Although the conferences typically lasted three to five days, some officials spent at least a month staying in “off-site condominiums and villas with private pools and hot tubs in gated communities” on the union’s dime, Donohue said. For the Region 5 conference in January 2016, which lasted five days, the UAW paid more than $11,000 for a person identified as “UAW Official D” to stay in a villa for 67 days and more than $15,000 for “UAW Official B” to stay in a villa for 105 days.

Among other expenses listed in the affidavit:

• More than $60,000 on cigars, humidors, cigar-cutting equipment and lighters from 2014 through 2018. Pearson is alleged to have bought 16 boxes of Diamond Crown Churchills at $243 each and 10 boxes of Ashton Monarch Tubos for $274.50 each.
• More than $60,000 for meals and alcohol, including four bottles of Louis Roederer Cristal Champagne, at LG Prime Steak House and Johnny Costa’s Ristorante in Palm Springs from 2016 through 2018.
• More than $80,000 at Indian Canyons Golf Resort for food, greens fees, club rental and retail purchases from 2015 through 2018. Donohue said Pearson signed an invoice on Dec. 31, 2016, for more than $2,000 worth of polo shirts, shoes, jackets, hats and “men’s fashion shorts.”

To date, nine people have pleaded guilty in connection with the ongoing federal criminal investigation into illegal payoffs to UAW officials by Fiat Chrysler Automobiles executives and corruption within the UAW itself.

Last week, former UAW official Michael Grimes pleaded guilty to wire fraud and money laundering. Grimes was an official in the union's General Motors department until his retirement in July 2018.

The widening probe raises new questions -- raised by Automotive News in March -- about whether the U.S. government might seek to take over the UAW. Peter Henning, a Wayne State University law professor and former federal prosecutor, said a UAW takeover would be “the nuclear option."

In 1988, the Justice Department sued to force out senior leaders at the International Brotherhood of Teamsters union and appoint a trustee because of the union's connection to organized crime. The government oversaw the union from March 1989 until 2015 when it agreed to a five-year transition period that will end in February 2020.

Reuters and Bloomberg contributed to this report.