GM lawsuit accuses FCA of labor corruption over last decade

DETROIT — General Motors on Wednesday filed a federal racketeering lawsuit against Fiat Chrysler Automobiles and three former FCA executives who have pleaded guilty in an ongoing federal corruption probe involving the UAW.

GM says FCA engaged in a "multiyear pattern of corruption ... to undermine the integrity of the collective bargaining process and cause GM substantial damages."

Filing the lawsuit against FCA wasn’t “a decision that we made lightly,” GM CEO Mary Barra said at the Barclays 2019 Global Automotive Conference Thursday. “It was something we very, very carefully considered.”

There wasn’t a “level playing field” throughout labor contract negotiations, she said. “We had to take action.”

In addition to FCA, former executives Alphons Iacobelli, Jerome Durden and Michael Brown are named as defendants. The UAW was not named in the suit.

The lawsuit comes at a delicate time for FCA, which agreed last month to a merger with PSA Group of France. FCA also is the last of the Detroit 3 still in negotiations with the UAW over a new four-year labor contract.

GM is seeking damages "not limited to" the billions the automaker claims to have suffered as a result of FCA’s wrongdoing.

"We are astonished by this filing, both its content and its timing," FCA said in an emailed statement. "We can only assume this was intended to disrupt our proposed merger with PSA as well as our negotiations with the UAW. We intend to vigorously defend against this meritless lawsuit and pursue all legal remedies in response to it."

GM, which the UAW chose as the first target of this year’s contract negotiations, lost six weeks of production as workers went on strike after talks broke down. GM has estimated the cost of the strike to be nearly $3 billion, and the resulting deal gave workers larger signing bonuses and steeper raises than the automaker had proposed.

The GM contract is expected to form the basis of the UAW’s deal with FCA, as it did at Ford.

The complaint also alleges that Sergio Marchionne, the former CEO of FCA who died in 2018, "was a central figure in conceiving, executing and sponsoring the fraudulent activity," GM's general counsel, Craig Glidden, told reporters.

FCA corrupted the negotiation, implementation and administration of the 2011 and 2015 bargaining agreements, GM said. The suit also accuses FCA of corrupting the implementation of the 2009 contracts.

GM wanted to file the lawsuit within four years of 2015 contract, Glidden told reporters. The automaker had enough evidence to file the complaint Wednesday with information gleaned from the Federal government’s probe into the corruption, along with its own investigation, he said.

The manipulation led to unfair labor costs and operational advantages that harmed GM, according to the complaint.

Through the lawsuit, GM said it wants to reinforce a bargaining process that is free of fraud and corruption.

GM is seeking "substantial damages," Glidden said, and money received would be invested in the U.S. to benefit GM's employees and increase jobs.

Over the past several years, FCA had a lower net labor cost than GM, Glidden said. The lawsuit aims to determine which of FCA's labor advantages were related to unlawful conduct.

"FCA conceived of the conspiracy, orchestrated the conspiracy, orchestrated the fraud," Glidden told reporters. "FCA was the central driver of the conspiracy."

The bribes went to numerous recipients, he said, but FCA has been the "common denominator."

GM did not consult with Ford Motor Co. about joining the lawsuit, Glidden said. A spokeswoman for Ford had no immediate comment on the case.

UAW response

“The UAW is focused on continuing to implement ethics reforms and greater financial controls to make sure the misconduct which has been uncovered will never happen again," the union said in a statement. "Mr. Iacobelli worked for both FCA and General Motors, and he is currently in prison for his crimes, which include the misuse of Joint Program funds.  

"As to the collective bargaining agreements negotiated with FCA while Iacobelli was an FCA manager, we are confident that the terms of those contracts were not affected by Iacobelli’s misconduct, nor that of any UAW officials involved in the misuse of Joint Program funds at FCA.  Those contracts, which were ultimately ratified by our membership, were negotiated with the involvement of both local and international representatives and the process had multiple layers of checks and balances to ensure their integrity.

"That said, the fact that these issues can cause doubt about the contracts is regrettable. The UAW leadership is absolutely committed to making whatever changes are necessary to ensure on our end the misconduct that has been uncovered will never happen again.”

Iacobelli was FCA’s labor relations chief until abruptly retiring just ahead of the 2015 UAW negotiations. GM later hired him as executive director of labor relations, but they parted ways after he was charged in the corruption probe. He was sentenced in August 2018 to 66 months in federal prison.

FCA benefits

A 14-page memorandum of sentencing for Iacobelli released at the time stated: "FCA sought to obtain benefits, concessions and advantages in the negotiation and administration of collective bargaining agreements with the UAW in an effort to buy labor peace. High-level officials of the UAW sought to enrich themselves and live lavish lifestyles rather than zealously work on behalf of the best interests of tens of thousands of rank and file members of their union.”

The memo also noted that, for certain aspects of FCA's negotiations and relationship with the UAW, Iacobelli reported directly to the automaker's late CEO, Marchionne, though it doesn't mention Marchionne by name.

Iacobelli and General Holiefield, the UAW’s chief negotiator with FCA in 2011, were alleged by the government to have embezzled millions from a training center jointly run by FCA and the union. Holiefield died in 2015 before being charged with any crimes.

Durden, an FCA financial analyst, pleaded guilty in August 2017 to one count of conspiracy to defraud the U.S. government, a felony, and one misdemeanor charge of failing to file a tax return for the approximately $4,000 he received in 2013 under the conspiracy. He was sentenced to 15 months in prison.

Brown was FCA’s director of employee relations. He was sentenced to a year in prison in November 2018 after admitting to helping cover up the conspiracy.

The GM suit is the second major racketeering suit filed against FCA since 2016. In April, FCA settled a 2016 antitrust lawsuit filed by a Chicago area dealership group that claimed the company pushed dealers to submit fraudulent sales figures. The suit claimed the automaker engaged in racketeering and breach of contract. 

Vince Bond contributed to this report.