Fiat Chrysler, Union Probe Yields 7th Prison Sentence of 2018 (1)

Dec. 18, 2018, 4:30 PM; Updated: Dec. 18, 2018, 7:03 PM

A former United Auto Workers administrative aide was sentenced to 12 months and one day in prison Dec. 18 for her part in an embezzlement scheme in which millions of dollars were diverted from a training center to union and automotive executives.

The sentencing brings an end to the first phase of the Justice Department’s investigation into the illicit use of union training center funds. The government contends that the UAW-Fiat Chrysler National Training Center was used as a conduit to facilitate payments from the auto industry to union and company executives, buying peace from the labor union during contract negotiations.

Nancy Johnson, a former UAW administrative assistant, was the seventh individual sentenced in the scheme this year. She was the last of the defendants charged with a crime to be sentenced. She must report to prison in six months to begin serving her sentence and will also face one year of supervised release and a $10,000 fine.

The government strongly hinted that its investigation is continuing and that additional indictments may be coming. Federal prosecutors asserted that Johnson’s cooperation—and that of others charged in the probe—is “incomplete” as the investigation expands. Investigators are also looking at automakers beyond Fiat Chrysler for wrongdoing.

“The judge had authority to impose a lower sentence than he did, but I recognize that the government has indicated its intent to request a reduction of the sentence depending on future developments in an investigation at some time in the future,” Johnson’s attorney, Harold Gurewitz, told Bloomberg Law. “I don’t think this is the final word.”

Johnson is ready to move on after sentencing and put the difficult legal process behind her, Gurewitz said.

“Senior UAW officials have sworn to zealously represent the hard working men and women of the union, first and foremost,” United States Attorney Matthew Schneider said in a statement following the sentencing. “The Court’s sentence today shows that our office will continue to prosecute UAW officials who betray their union oaths and break the law.”

Steaks, Cigars, and Liquor

Johnson faced up to 18 months in prison for her part in redirecting more than $40,000 in training center funds. She pleaded guilty to violating the Labor Management Relations Act in July.

Court documents describe a lifestyle of luxury and extravagance in the upper levels of UAW leadership from 2014 to 2016. The spending spree was funded by Fiat Chrysler and compromised the collective bargaining agreement reached with FCA in 2015, according to prosecutors.

The UAW said in a statement to Bloomberg Law last month that it instituted safeguards to prevent similar corruption from happening again. The actions of union officials “had no effect on our collective bargaining agreement,” the union said.

But prosecutors revealed that in the lead-up to bargaining in 2015, Fiat Chrysler funneled money through the training center to buy UAW leadership an $8,494 dinner at a Detroit steakhouse, complete with liquor and cigars. Johnson reportedly put $800 of that on her training center credit card.

When negotiations were complete, FCA bought union leadership another steakhouse dinner totaling $6,913, all of which Johnson charged to the training center. No Fiat Chrysler officials were present and no training center business was discussed at either meal, according to prosecutors.

Johnson and other UAW officials also used training center charge cards to buy monthlong stays at condominiums that included rounds of golf and limousine services in Palm Springs, Calif.

“If you see something you want, feel free to buy it,” former FCA Vice President Alphons Iacobelli told Johnson, according to court documents. “I don’t have a problem if you buy it on the charge card.”

(Updated to include quotes from the U.S. Attorney's Office and Nancy Johnson's attorney.)

To contact the reporter on this story: Andrew Wallender in Washington at awallender@bloomberglaw.com

To contact the editor responsible for this story: Martha Mueller Neff at mmuellerneff@bloomberglaw.com

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