Feds charge ex-UAW leader in growing corruption scandal
Feds charge ex-UAW leader in growing corruption scandal
Robert Snell, Kalea Hall and Breana Noble , The Detroit News Published 4:07 p.m. ET Aug. 14, 2019 | Updated 6:20 a.m. ET Aug. 15, 2019
Detroit — A former senior United Auto Workers official has been charged with wire fraud conspiracy and money laundering, marking an expansion of a federal corruption investigation that has spread beyond Fiat Chrysler Automobiles NV.
Mike Grimes, left, and UAW Vice President Cindy Estrada.
Mike Grimes, left, and UAW Vice President Cindy Estrada. (Photo: Facebook)
Michael Grimes — who until last year served as administrative assistant to UAW Vice President Cindy Estrada — received $1.99 million in kickbacks from union vendors, according to the government.
He and other unnamed union officials assigned to General Motors Co. were paid hundreds of thousands of dollars in bribes and kickbacks from vendors who received contracts to produce promotional merchandise for the UAW, according to a criminal case unsealed Wednesday.
The criminal charges, which could send Grimes to federal prison for up to 20 years, help federal investigators pierce the inner circle of Estrada, a sitting UAW vice president and head of the union’s FCA department who has been under scrutiny for almost two years. The case also expands the scope of a criminal investigation that, until now, focused on Fiat Chrysler executives trying to influence contract negotiations by giving UAW officials money, lavish trips and more.
The criminal filing Wednesday described old-school corruption and greed that deprived UAW members of honest leadership and involved officials in charge of the UAW-GM Center for Human Resources, a training center for blue-collar workers. The alleged scheme also defrauded the training center, prosecutors said.
“This is the first shoe to drop involving General Motors and the UAW,” said Peter Henning, a Wayne State University law professor and former federal prosecutor. “It raises the question of what kind of monitoring the UAW was doing, or was there any?”
The criminal case was filed four months after The Detroit News exclusively reported that federal investigators were reviewing whether UAW leaders received kickbacks after giving business executives contracts to produce union-branded clothes and trinkets.
Grimes is the ninth person charged in an ongoing investigation, and the criminal case embroils a training center for blue-collar workers jointly operated by the UAW and GM.
“Mike Grimes benefited only himself, not the UAW membership, and should be fully prosecuted to the extent of the law,” union spokesman Brian Rothenberg wrote in an email to The News.
The allegations involve a key UAW official who served alongside Estrada, who was assigned to the union’s GM department until last year, when she was transferred to head the scandal-plagued Fiat Chrysler department. The News reported in November 2017 that federal investigators were interested in Joe Ashton, a retired UAW vice president appointed to GM’s board in 2014, and Estrada, his successor.
Ashton resigned from GM’s board one month after The News report.
“GM has been fully cooperating with the government on its investigation of the UAW Center for Human Resources, and will continue to do so,” a GM spokesman said Wednesday. “As a matter of practice, we do not comment on the specifics of an ongoing investigation.”
Joe Ashton, left, and Cindy EstradaBuy Photo
Joe Ashton, left, and Cindy Estrada (Photo: The Detroit News)
Investigators have expanded the inquiry to all three Detroit automakers and also are focused on whether senior UAW staff were forced to contribute to accounts originally established to buy flowers for autoworkers’ funerals, and whether union leaders kept the cash.
Grimes, 65, of Fort Myers, Florida, was charged in a criminal information, which indicates a guilty plea is expected. That could give federal prosecutors another key cooperator in the ongoing investigation.
“I am aware of the charges brought against Mr. Grimes,” Grimes’ lawyer Michael Manley wrote in a text to The News. “There will be no comment on the charges or any potential resolution at this time.”
Grimes has not returned calls or message left by The News since April.
The criminal case focuses on self-dealing and kickbacks allegedly paid to union leaders for awarding deals for UAW-branded trinkets, including more than $3.9 million spent on commemorative watches that were never distributed to union members.
The alleged conspiracy started in 2006 and lasted until July 2018, according to the government. During that time, Grimes worked alongside Estrada and served on the UAW-GM training center board alongside Ashton and others. He was paid $150,574 a year.
The scheme described by prosecutors involved Grimes and two unnamed union officials allegedly enriching themselves by deceptively soliciting, influencing and obtaining contracts for two vendors. One contractor, identified by the government as “Vendor A,” owned a family-operated business that sold American-made custom logo products, including clothes and accessories.
The second contractor, identified as “Vendor B,” was a chiropractor based in Philadelphia and southern New Jersey. The chiropractor treated one of the unnamed union officials for years.
Ashton, 71, lives in Ocean View, New Jersey.
In August 2012, the chiropractor opened a new business that purportedly sold American-made custom watches. The company’s only income came from the UAW and the training center operated with GM.
During the alleged conspiracy, Grimes and the two unnamed UAW officials demanded and accepted hundreds of thousands of dollars from the two vendors, prosecutors said.
In 2006, Grimes recommended “Vendor A” provide 23,000 watches to the UAW-GM training center, according to court records. After awarding the contract, Grimes demanded a loan to buy property in Rose Township in northern Oakland County, prosecutors said. The vendor refused and Grimes threatened to cancel the watch contract, according to court records.
“Fearing economic harm to his company, Vendor A agreed to provide a mortgage for $60,000 so that Michael Grimes could buy the property,” prosecutors wrote. The vendor also agreed to pay Grimes $1,800 per month for consulting work. The monthly payments rose to $3,800 per month and continued until Grimes retired in July 2018, according to the government.
Grimes also demanded bribes in exchange for not interfering with the vendor’s business, according to prosecutors. To hide the bribes, the vendor wrote checks payable to “KKG Consulting,” which prosecutors called a sham company. State business records show the company was created by Grimes’ wife Karen in 2001.
Karen Grimes (Photo: Lee County Sheriff’s Office)
From 2010 through 2017, the vendor paid Grimes almost $900,000, prosecutors said, adding that Grimes was involved in another tainted contract in 2011.
This time, an unnamed UAW official identified as “Union Official 1” proposed buying 50,000 “Team UAW-GM” jackets using training center funds. Grimes recommended steering the contract to “Vendor A,” prosecutors said.
The vendor later received a $6 million contract. A second unnamed union official directed Grimes to demand an approximately $300,000 kickback for “Union Official 1” prosecutors said. The official received the money in 2012.
Grimes also demanded a $525,000 kickback and threatened to cancel the jacket contract, prosecutors said. Grimes later increased his demand and received $530,000 from the vendor, which he spent paying off property in Fenton, according to the government.
In 2016, Grimes received a $500,000 kickback from the same vendor in exchange for awarding a $5.8 million contract to provide backpacks for UAW members, prosecutors said. The money was funneled through Karen Grimes’ sham company, according to the government.
Grimes also received money from another watch contract involving the Pennsylvania chiropractor, prosecutors said.
In 2012, “Union Official 1” told the chiropractor to create a new company so the UAW could buy more than 50,000 watches.
The next year, the UAW-GM training center awarded a $3.97 million contract to the vendor for 58,000 watches. In May 2013, “Union Official 1” demanded a $250,000 kickback, money that was hand-delivered to the union official’s home, prosecutors said. A second UAW official also received kickbacks from the watch vendor, according to the government.
To conceal the scheme, the watch vendor wrote “antique furniture” or “furniture” in the memo line of the checks. The second UAW official split some of the money with Grimes, prosecutors said.
The watch contract kickbacks continued until fall 2016, when news broke about the federal corruption investigation involving the UAW and Fiat Chrysler.
“Union Official 1” met with the watch vendor and said “the payments had to stop because of the UAW/Fiat Chrysler investigation,” prosecutors said.
The UAW-GM training center received the watches anyway. The 58,000 watches are not on UAW member wrists, however — they are being stored in a warehouse at the training center.