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UAW leader charged with embezzling union funds amid contract talks with Detroit automakers

Key Points
  • Federal prosecutors say UAW leader Vance Pearson conspired with other union officials to embezzle hundreds of thousands of dollars in union money.
  • Pearson was arrested Thursday and faces charges of embezzlement of union funds, money laundering, and aiding and abetting, among other corruption charges.
  • Pearson is the 10th person to be charged as part of the DOJ's multiyear investigation, which has led to convictions of nine officials affiliated with the union or Fiat Chrysler.
UAW Region 5 Director Vance Pearson

DETROIT — A regional director with the United Auto Workers union was charged Thursday with embezzling union funds and other criminal charges as part of a widening federal corruption probe into the union.

Federal prosecutors say UAW Region 5 Director Vance Pearson, a member of the union's highest governing board, conspired with other union officials to embezzle hundreds of thousands of dollars in union money "for their own personal benefit along with other crimes."

Pearson, 58, of St. Charles, Missouri, was arrested Thursday and faces charges of embezzlement of union funds, money laundering, aiding and abetting, conspiracy, mail and wire fraud, and filing and maintaining false union reports to the government.

The charges come as the union negotiates new contracts with the Big Three Detroit automakers and two weeks after FBI and IRS agents raided Pearson's home and office in Missouri. They also raided the homes of UAW President Gary Jones and former UAW President Dennis Williams, among other properties. Jones and Williams have not been charged with any crimes.

FBI agents finish loading materials into a truck out of the home of United Auto Workers President Gary Jones on Wednesday, Aug. 28, 2019.
Michael Wayland / CNBC

'Not proof of wrongdoing'

The UAW, in an emailed statement, said the "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."

The union added it will not let the newest charges or Pearson's arrest "distract" officials from ongoing contract negotiations with General Motors, which it chose last week to lead the contract talks over Ford Motor and Fiat Chrysler.

GM said in a statement Thursday: "GM is outraged and deeply concerned by the conduct of union officials as uncovered by the government's investigation and the expanding charges revealed today. These serious allegations represent a stunning abuse of power and trust. There is no excuse for union officials to enrich themselves at the expense of the union membership they represent."

Pearson's arrest and charges against him are likely to add to what were already expected to be contentious contract negotiations between the union and the automakers. The current contracts expire at 11:59 p.m. Saturday.

Pearson is the 10th person to be charged as part of the Department of Justice's four-year investigation, which has led to convictions of nine officials affiliated with the union or Fiat Chrysler.

The charges against Pearson mark a major turn in the investigation, as he is an active leader of the UAW. All previous charges have been against former or retired union officials.

Pearson, who joined the UAW in 1981, succeeded Jones as director of UAW Region 5. It is the largest geographic region of the union, spanning 17 Western and Southwestern states, from Missouri, Arkansas and Louisiana to California, Washington, Alaska and Hawaii.

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Investigators are expanding the probe into UAW

Feds: Union money used for personal expenditures

The Detroit criminal complaint alleges Pearson and other unnamed union officials conspired to embezzle UAW money by concealing personal expenditures in the cost of UAW Region 5 conferences held in California and Missouri.

Federal prosecutors said Pearson and other union leaders used UAW money, for example, to buy sets of golf clubs, individual clubs and other golf equipment that cost thousands of dollars. Other notable expenditures in the allegations include:

  • $100,000 to purchase golf clothing, shirts, hats, sunglasses, golf balls, jackets and fashion shorts from various pro shops at golf courses in California and Missouri.
  • $60,000 for the purchase of boxes of cigars, humidors, cigar-cutting equipment and lighters from 2014 to 2018.
  • Hundreds of thousands of dollars in UAW funds to rent villas with individual pools in gated communities in Palm Springs for senior union officials for long periods of time outside of the dates set for the UAW conferences to which they were charged.
  • Meals for senior UAW officials at high-end restaurants outside the time periods of the UAW conferences.

During the executed search warrants two weeks ago, prosecutors say agents recovered dozens of cigars, humidors and other tobacco-related items in the personal residences. In addition, agents seized hundreds of high-end bottles of liquor, hundreds of golf shirts, multiple sets of golf clubs, and tens of thousands of dollars in cash.

Each instance of embezzlement of union funds is punishable by five years in prison and a $10,000 fine. Mail and wire fraud carry a maximum sentence of 20 years imprisonment and a fine of $250,000. Money laundering carries a maximum sentence of 20 years in prison and a fine of up to $250,000.

Expanding investigation

When the federal investigation was made public in July 2017, it focused on a jointly operated training center between the UAW and Fiat Chrysler. But it quickly expanded to probes into similar operations with GM and Ford, which both previously confirmed they were cooperating with the investigation.

No union or company officials with Ford have been charged.

Michael Grimes, a retired senior official with the union's GM division, pleaded guilty last week to charges of wire fraud and money laundering. He was the first person not affiliated with Fiat Chrysler to be charged as part of the investigation.

Retired United Auto Workers official Michael Grimes, right, exits the U.S. courthouse in Ann Arbor, Michigan, after pleading guilty to federal corruption charges on Wednesday, Sept. 4, 2019. His attorney Michael P. Manley is being interviewed in blue suit.
Michael Wayland | CNBC

Prosecutors have not identified any GM executives as being involved in the corruption, as they did with Fiat Chrysler.

The Detroit training centers are jointly overseen by the companies and union but funded by the automakers as part of their collective bargaining agreements.