FCAU Fiat Chrysler Automobiles NV

By Ben Foldy and Nora Naughton 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (January 7, 2020).

Federal prosecutors filed a new charge against a former United Auto Workers official Monday, alleging the defendant was involved in an embezzlement scheme that was part of a wider racketeering enterprise at the union.

The U.S. attorney's office in Detroit charged Vance Pearson, a former director at UAW's regional office in Missouri, with one count of conspiracy to embezzle union funds and to use a facility of interstate commerce to aid a racketeering enterprise, according to documents filed in a Michigan federal court.

The new charge is the first to specifically mention racketeering in the yearslong investigation into corruption and embezzlement at the union. The criminal probe has led to 11 convictions of union officials and former executives at Fiat Chrysler Automobiles NV since 2017. Mr. Pearson's lawyer didn't immediately return a request for comment.

The inclusion of the racketeering language is significant and aims to signal that investigators are considering a RICO case against the union, a person close to the investigation told The Wall Street Journal. The Racketeer Influenced and Corrupt Organizations Act, known as RICO, focuses on racketeering.

Investigators allege that Mr. Pearson sent an email across state lines to a union accounting official in June of 2016 that falsely claimed more than $19,000 in golf expenses were for meals, according to the charging document. Prosecutors also charge that Mr. Pearson was involved in the illegal scheme with other unidentified union officials and that their alleged misconduct continued from 2010 to September last year.

Mr. Pearson was first charged in September with six counts including embezzlement of union funds and mail and wire fraud, but those charging documents made no mention of racketeering. At the time, his lawyer said Mr. Pearson had planned to fight the charges. He hasn't yet formally entered a plea.

The new charge replaced the ones previously filed.

The investigation first became public at Fiat Chrysler, where three former employees, including a former labor-relations executive, were convicted of involvement in stealing worker-training center funds.

Since then, the probe has expanded to other parts of the UAW leadership, implicating former President Gary Jones. Mr. Jones resigned from his post and forfeited his UAW membership late last year after the union's board moved to oust him, saying an internal probe had found he had falsified expense reports.

Mr. Jones's attorney J. Bruce Maffeo has said the former union leader decided to resign before learning of the UAW board's intention to remove him from office.

The UAW's new president, Rory Gamble, has said publicly that he plans to combat corruption through a series of reforms, including disbanding the regional office formerly led by Mr. Pearson and Mr. Jones.

In December, Matthew Schneider, the U.S. attorney for eastern Michigan, said in an interview that the union has withheld evidence and information from his office, which has been investigating allegations of financial misconduct involving top officials.

Mr. Schneider said his office is considering various options regarding how to proceed, including the possibility of federal oversight of the union, an approach taken with the Teamsters in the past to sever ties with organized crime.

The U.S. attorney's office wouldn't comment on the possibility of additional charges in the case, a spokeswoman for the office said Monday.

"You don't bring a racketeering charge lightly," said Peter Henning, a law professor at Wayne State University who focuses on corporate law and white collar crime. "That is a significant escalation of the case," he said.

Write to Ben Foldy at Ben.Foldy@wsj.com

(END) Dow Jones Newswires

January 07, 2020 02:47 ET (07:47 GMT)

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