FCA-UAW conspiracy ran deeper, longer, lawyer says

Detroit — A vast conspiracy designed to corrupt contract negotiations between Fiat Chrysler Automobiles NV and the United Auto Workers started long before the automaker's former labor negotiator, Alphons Iacobelli, got involved, his lawyer said Monday.

A sentencing memo filed in federal court Monday indicates more Fiat Chrysler executives were involved in the $4.5 million conspiracy but does not publicly identify who, if anyone, orchestrated the conspiracy or ordered illegal payments. The filing suggests Iacobelli is fulfilling his obligation to cooperate with an ongoing FBI investigation.

Iacobelli, 59, of Rochester Hills faces up to eight years in federal prison when sentenced Aug. 27 for his role in the scandal. Iacobelli pleaded guilty in January to one count of conspiracy to violate the Labor Management Relations Act and one count of subscribing a false tax return.

An eight-year prison sentence would be unwarranted and unjust because Iacobelli is not responsible for all of the misconduct involving Fiat Chrysler executives and UAW officials, defense lawyer David DuMouchel wrote Monday.

"The corruption that is the focus of this case did not begin with Al Iacobelli. The practices that form the backbone of this case did not begin with Al Iacobelli. The system of corruption that has been exposed here did not begin with Al Iacobelli," DuMouchel wrote. "Mr. Iacobelli’s hope is that such practices — which did not originate with him — nor for that matter the others who have been convicted here — will end with him."

The investigation, which has expanded to include General Motors Co. and Ford Motor Co., is focused on whether automakers funneled illegal payments and benefits to UAW leaders through jointly operated training centers.

Fiat Chrysler released a statement late Monday in response to an inquiry from The Detroit News.

"The company has investigated the allegations and has found no evidence that any FCA US employees senior to Alphons Iacobelli were aware of or participated in any illegal activities related to the (National Training Center),” the FCA statement said.

DuMouchel urged U.S. District Judge Paul Borman to sentence Iacobelli to less than four years in prison. Iacobelli also has agreed to pay $835,523 in restitution to the Internal Revenue Service.

"But, it is punishment — and severe punishment, not only for what he did, but for what others did, who apparently believe it is a good idea to lay the blame for all this misconduct at the feet of Al Iacobelli," the lawyer wrote. "Much of it belongs there; much of it does not."

The sentencing memo reiterated that payments and valuable items given to UAW officials were designed to corrupt the collective bargaining process between the automaker and the UAW.

"Both FCA and UAW officials contend that 'it had no effect.' Mr. Iacobelli, however, has stated that the payments were made in an effort to obtain benefits, concessions, and advantages for FCA in the negotiation, implementation, and administration of the collective bargaining agreements between FCA and the UAW," the lawyer wrote. "That is exactly why they were made."

Iacobelli is the highest-ranking Fiat Chrysler official indicted in a scandal that has led to criminal charges against seven people and reshaped the top ranks of the auto industry as FBI agents investigate all three Detroit automakers.

Prosecutors say Iacobelli used training funds to buy a $365,000 Ferrari, a pool and bejeweled fountain pens worth $71,000.

In Fiat Chrysler's case, prosecutors say the automaker's executives created a policy to keep UAW leaders “fat, dumb and happy” and wring concessions favoring the automaker.

Iacobelli will be the second person sentenced in the scandal. Last month, Monica Morgan-Holiefield, the widow of UAW Vice President General Holiefield, was sentenced to 18 months in federal prison for a tax crime.

Iacobelli worked as Fiat Chrysler's vice president of employee relations from 2007 to 2015 and was the lead negotiator in the 2009 Chrysler/UAW labor agreement.

The conspiracy started in approximately January 2009, according to the government. 

"However the reality is that the conspiracy at issue here had started long before that," DuMouchel wrote. "Mr. Iacobelli joined an already ongoing conspiracy. The practices and corruption that are the focus of this case started long before Mr. Iacobelli."

There are at least three co-conspirators who have not been charged, according to the government and court records.

The three are: Fiat Chrysler, the UAW and, as revealed in the filing Monday, the jointly operated UAW-Chrysler National Training Center.

The filing by Iacobelli's lawyer Monday does not identify other new potential targets or Fiat Chrysler executives involved in the conspiracy. Several passages are redacted in the 25-page document.

The only other Fiat Chrysler officials charged so far:

• Former Fiat Chrysler analyst Jerome Durden, who struck a plea deal last year and is awaiting a possible 37-month prison sentence. He was accused of helping transfer millions of dollars in training center funds to Holiefield, Morgan-Holiefield and Iacobelli, who used the funds on personal luxuries.

• Former Fiat Chrysler executive Michael Brown, who helped run the UAW-Chrysler National Training Center, also pleaded guilty and could be sentenced to 18 months in prison. He admitted providing misleading and incomplete information to a federal grand jury.

Iacobelli outranked the men during a career spanning multiple owners of Detroit's smallest automaker.

In March 2007, Iacobelli became Chrysler’s vice president of employee relations. Two months later, DaimlerChrysler AG dissolved when Daimler sold its controlling interest in Chrysler to Cerberus Capital Management LP for $7.4 billion. Daimler briefly retained a 19.9 percent stake.

About two years later in April 2009, Chrysler filed for Chapter 11 bankruptcy during the financial crisis, and Cerberus exited the company a month later. In June 2009, Chrysler reorganized as Chrysler Group LLC, which Fiat SpA subsequently acquired.

Iacobelli ascended to the lead negotiating position with Chrysler in 2008 amid a realignment of the human resources staff, essentially replacing retired senior vice president of employee relations John Franciosi. After Franciosi's retirement, Iacobelli was realigned to report to the executive vice president for human resources and communications, Nancy Rae.

Iacobelli abruptly retired in June 2015, a month before negotiations with the UAW were to begin and amid an FBI investigation. Fiat Chrysler, though, said it fired Iacobelli after officials learned of the federal investigation and launched an inquiry.

Iacobelli’s supervisor was Michael Keegan. He headed human resources for FCA North America until being named head of the automaker’s global communications in August 2017.

Fiat Chrysler has provided lawyers for Keegan and other executives questioned during the investigation. A Fiat Chrysler spokeswoman said the practice is customary.

Fiat Chrysler CEO Sergio Marchionne was questioned by investigators and was being represented by a criminal defense lawyer amid the ongoing investigation. Marchionne died last month.

Federal prosecutors have secured convictions of three former UAW officials so far.

One former official, Nancy Adams Johnson, told federal prosecutors UAW President Dennis Williams directed subordinates to use funds from Detroit’s automakers, funneled through training centers, to pay for union travel, meals and entertainment.

Williams has not been charged with a crime.

The scandal, meanwhile, has left Iacobelli with a ruined reputation and shattered life, his lawyer argued Monday.

"Admittedly, he was part of the problem," DuMouchel wrote. "He was not the problem."

rsnell@detroitnews.com 

(313) 222-2486

Twitter: @robertsnellnews

Staff writer Breana Noble contributed.