Top Stories
Top Stories

UPDATE 2-Top regional UAW official charged in widening corruption probe

Nick Carey and David Shepardson

(Adds details from criminal complaint, background)

DETROIT/WASHINGTON, Sept 12 (Reuters) - A senior United Auto Workers (UAW) official was arrested on Thursday and charged with conspiring with other union leaders to embezzle hundreds of thousands of dollars in a mushrooming corruption scandal that comes at a decisive moment in contract talks with Detroit automakers.

The union's current four-year contract with U.S. automakers expires on Saturday.

The contract talks were always expected to be contentious, with healthcare costs and profit sharing due to be major sticking points, but Saturday's deadline could be overshadowed by revelations of vast sums being spent on lavish entertainment by labor leaders - including $440 bottles of champagne originally created to please a Russian czar.

The union has been trying to put the federal probe behind it and in 2018 elected Gary Jones, a former regional director for the union, as its president. He was chosen as he seemed far removed from the scandal.

But Vance Pearson, 58 served as Jones' second in command from 2016 to 2018 and replaced him last year as director of the UAW's so-called "Region 5," which covers 17 western and southwestern U.S. states.

Pearson's arrest comes just two weeks after the FBI conducted searches at the home of Jones himself, along with a union retreat and multiple other locations, as part of an ongoing corruption probe into illegal payments to union officials.

Jones has not been charged with any wrongdoing.

J. Bruce Maffeo, a lawyer for Jones, did not immediately respond to a request for comment and the UAW also had no immediate comment.

The complaint said between 2014 and 2018 Pearson and other leading UAW officials "submitted fraudulent expense forms seeking reimbursement from the UAW's Detroit headquarters for expenditures supposedly incurred in connection with Region 5 leadership and training conferences."

The officials "used the conferences to conceal the use of hundreds of thousands of dollars in UAW funds to pay for lavish entertainment and personal spending for the conspirators," the complaint said.

Much of the complaint centers on conferences held by the UAW's Region 5 in Palm Springs, California. The allegations include that, through a "master account" set up at a Palm Springs hotel, union officials embezzled more than $600,000 that was spent on lavish living for weeks or months at a time.

The complaint singles out a dinner at a local restaurant on New Year's Eve 2016 that cost $6,600, including four bottles of Louis Roederer Cristal champagne for a total of $1,760.

The complaint then accurately quotes the Louis Roederer website as saying the Cristal was "created in 1876 to satisfy the demanding tastes of (Russian) Tsar Alexander II," who was assassinated by a revolutionary in 1881.

To date, nine people have pleaded guilty in connection with the ongoing criminal investigation into illegal payoffs to UAW officials by Fiat Chrysler Automobiles NV 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 Co department until his retirement in July 2018. (Reporting by David Shepardson in Washington and Ben Klayman and Nick Carey in Detroit Editing by Chizu Nomiyama, Sandra Maler and Tom Brown)