Feds investigate UAW 'flower funds' in corruption probe
Detroit — Federal agents are investigating whether senior United Auto Workers staff were forced to contribute money to funds originally established to buy flowers for auto workers' funerals, and whether union executives pocketed the cash, The Detroit News has learned.
Investigators are questioning whether UAW leaders threatened to send high-level staffers back to the assembly line if they failed to contribute to so-called flower funds controlled by union presidents, vice presidents and regional directors, three sources familiar with the investigation said.
"This could be explosive and really damaging within the UAW," said Erik Gordon, a University of Michigan business professor. "This positions the union not as the workers' friend but as a big powerful thing that would extort money from its own members."
Flower fund contributions were voluntary, UAW spokesman Brian Rothenberg said late Thursday.
“No UAW employee was or is forced or compelled to contribute to any 'flower fund,'" Rothenberg wrote in a statement. "Participation has always been voluntary and at the discretion of the individual.”
The investigation, one of several avenues being pursued in an ongoing probe of corruption within the U.S. auto industry, is the latest inquiry by the government into secretive, loosely regulated pots of money controlled by union leaders.
More: Ex-UAW official Jewell to plead guilty in auto conspiracy
Simultaneously, federal agents are questioning UAW officials' use of almost $1 million of membership dues on condominiums, liquor, food and golf in California, where former Region 5 Director Gary Jones held annual conferences until becoming UAW president last year.
Prosecutors have secured the convictions of seven people, including three former UAW officials who are cooperating with an ongoing investigation that has various threads, including:
• Whether union officials conspired with auto executives to corrupt labor negotiations.
• If UAW leaders at General Motors Co. and Ford Motor Co. received money or benefits through their tax-exempt nonprofits.
• Whether former 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, as former UAW official Nancy Adams Johnson told prosecutors. Williams has not been charged with wrongdoing during the ongoing investigation.
Flower funds were created initially to pool voluntary contributions from union members for funeral flowers and to finance union election campaigns. Use of the funds has drawn scrutiny from federal and congressional investigators since at least the 1950s.
In the ongoing UAW investigation, agents are questioning whether flower fund contributions became a mandatory job requirement and whether UAW executives spent the money on personal expenses and kept the rest upon retirement, sources told The News.
When UAW Vice President General Holiefield retired in 2014 as head of the union's Fiat Chrysler Department, sources told The News he kept the more than $30,000 remaining in his flower fund. Holiefield died in 2015.
Williams also had a flower fund. A source said he did not keep money remaining in it when he retired as UAW president last summer.
Former UAW Vice President Jimmy Settles, who headed the union’s Ford Motor Co. department, retired last year after a 50-year union career and joined Detroit Mayor Mike Duggan’s administration.
Through a city spokesman Thursday, Settles said that when he retired all of the money in the flower fund was left for his successor and that all contributions were voluntary.
Similar funds have been viewed by prosecutors in other federal criminal cases as slush funds that bankrolled personal luxuries for union leaders.
Allegations involving the funds have factored into investigations of the UAW and other unions in recent decades and involved workers who feared losing jobs unless they contributed part of their salaries. The prosecutions, however, have yielded mixed results. A spokeswoman for the U.S. Attorney's Office declined comment.
Union leaders historically have controlled their own flower funds and had broad discretion in spending the money, sources familiar with the investigation said. It is unclear exactly how much UAW employees contributed to the funds, but dozens of staff members contributing to a single flower fund would generate thousands of dollars in unreported revenue each month, sources said.
One flower fund that drew the attention of investigators is the "Diamond Fund," which sources say was controlled by retired UAW Vice President Norwood Jewell.
Jewell, 61, was charged by federal prosecutors Monday and accused of participating in a labor conspiracy involving Fiat Chrysler Automobiles NV executives. He is scheduled to plead guilty to the conspiracy charge April 2 in federal court.
The criminal filing against Jewell does not mention flower funds.
"Mr. Jewell retired 15 months ago from the UAW. He left the fund to be used by his successor," Jewell's defense lawyer Michael P. Manley wrote in a statement late Thursday. "He has not withdrawn any funds from the account in question since his retirement."
It is unclear if Jewell is cooperating with the ongoing investigation in hopes of receiving a lighter prison sentence.
"If Jewell is cooperating, he could provide a roadmap to the financial dealings in the UAW," said Peter Henning, a Wayne State University law professor and former federal prosecutor.
Prosecutors and the team of agents have key witnesses who could provide insight. Threeformer UAW officials have been convicted so far, along with Holiefield's widow, Monica Morgan-Holiefield.
The former union officials are cooperating with the investigation. Federal agents also have been interested in Joe Ashton, a retired UAW vice president who headed the union's General Motors Co. department, and Cindy Estrada, who replaced Jewell as vice president in charge of the union's Fiat Chrysler department.
Ashton resigned from GM's board in December 2017 amid the federal probe and a related internal investigation conducted by the Jones Day law firm for the Detroit automaker.
It is unclear if flower funds are covered by a new gift ban imposed by the UAW since prosecutors started indicting former UAW and Fiat Chrysler officials in summer 2017. The ban bars union leaders and negotiators from accepting gifts, gratuities, meals, entertainment or anything of value.
Jones, the UAW president, reiterated the new gift ban policy on March 13, referring to a document titled "The UAW's Clean Slate." But the announcement came four years after the Justice Department started investigating union finances.
The government's renewed interest in flower funds is unfolding 33 years after former UAW official Robert "Buddy" Battle III was acquitted of charges in federal court that he used flower fund money to buy a car, exercise equipment and health club memberships.
In 1989, the Labor Department launched a widespread investigation into whether UAW officials nationwide were misusing the funds. That year, investigators issued 24 subpoenas for documents and financial records related to the funds. The investigation did not yield criminal charges.
Last year, former Operating Engineers Local 324 head John Hamilton was sentenced to two years in federal prison following an investigation involving a similar fund. Hamilton had been accused of coercing and intimidating dozens of union officials into each giving him $5,200 annually for a fund that was supposed to bankroll union re-election efforts.
"In practice, however, the slate fund was a slush fund, where Hamilton used portions of the money for his own personal expenses," Assistant U.S. Attorneys David Gardey and Dawn Ison wrote in a sentencing memo. Union officials "knew that if they refused to pay into the fund, Hamilton would immediately terminate them, and they and their families would be left without a job or income."
When he lost re-election, Hamilton emptied $145,000 from the fund. Gardey, who prosecuted Hamilton, oversees the auto industry prosecution that started with the UAW and Fiat Chrysler before expanding to all of Detroit's automakers.
Fear of the factory floor has factored into criminal cases of other UAW officials. High-ranking union leaders sentenced last year for their roles in the ongoing corruption scandal said they feared losing six-figure jobs, travel perks and expense accounts and being sent back to the factory if they disregarded orders.
"The consequences of a failure to do as you have been told would have quickly led you back into a factory and to be ostracized by UAW leadership," lawyer Robert Sheehan wrote in a court filing for his client, former union official Keith Mickens.
Convicted UAW official Virdell King feared being sent back to the plant if she betrayed superiors.
"Persons like Ms. King are beholden to their superior, and if such a person outlasts her or his welcome that person is demoted or, worse, terminated from the International (UAW) and, if the person wants to keep the union job, sent back to the plants," her lawyer John Shea wrote in a court filing.
If federal agents find wrongdoing involving flower funds, the investigation could damage the UAW’s unionization efforts involving foreign automakers, Gordon said.
"It’s one thing to extort money from Fiat Chrysler or GM, they’re the enemy in the class warfare,” Gordon said. “But to use union muscle to extort money out of your own members, you can be sure in every organization drive, in Tennessee or Alabama or wherever, the other side is going to use this.”
Extortion allegations recall a darker period in the labor movement, Gordon said: “It sends you back to the image of baseball bat thuggery. But instead of hitting you with a baseball bat, they’re sending you back to the factory floor.”
rsnell@detroitnews.com
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Twitter: @robertsnellnews