UAW's former GM VP Ashton linked to bribery probe
Detroit — Former United Auto Workers Vice President Joe Ashton is the unnamed union official accused in a federal criminal complaint of demanding $550,000 in kickbacks and bribes from vendors and helping orchestrate an alleged conspiracy, four sources told The Detroit News.
The sources helped decode a new criminal case filled with aliases and alleged secret payoffs that chronicles a conspiracy stretching from Detroit to the Jersey shore. It's the latest turn in the federal government's years-long investigation into corruption of the union and its joint training centers funded by Detroit's automakers.
The complaint, unsealed Wednesday in federal court, charges former UAW official Mike Grimes with wire fraud conspiracy and money laundering and accuses him of teaming with unnamed union leaders to pocket millions in kickbacks and bribes from UAW contractors.
Prosecutors have not publicly identified Grimes' alleged co-conspirators or two UAW contractors who paid bribes and kickbacks. But four sources familiar with the investigation identified Ashton as "Union Official 1," the senior UAW official who is accused of conspiring to demand and receive bribes in exchange for steering multimillion-dollar contracts to vendors, including his personal chiropractor.
Prosecutors say the conspiracy defrauded UAW members and the UAW-GM Center for Human Resources, a jointly operated training center for blue-collar workers.
Ashton, 71, sat on General Motors Co.'s board of directors until resigning under a cloud of suspicion two years ago. He is the highest-ranking official linked to a criminal investigation into whether money and illegal benefits corrupted UAW leaders and the collective bargaining process.
Ashton's identification is the latest development in the continuing federal corruption probe, and it comes as UAW bargainers work toward a Sept. 14 national contract deadline with Detroit’s three automakers.
The deepening scandal at the highest reaches of the UAW is “definitely affecting the credibility” of union leadership and what kind of contract members could be asked to sign, said Eric Selle, managing director of SunTrust Robinson Humphrey Inc. in Atlanta, who follows UAW issues closely. “They just don’t trust Solidarity House. What, exactly, are you signing?”
In a statement, union spokesman Brian Rothenberg called the charges against Grimes “shocking and absolutely disgraceful," adding: "Make no mistake about it, our laser focus continues to be on obtaining strong labor agreements with FCA, Ford and General Motors that secure our members’ economic and financial future."
The allegations involving Ashton and Grimes, the ninth person charged in the ongoing corruption scandal, are raising new questions and concerns among UAW members two years into the federal investigation.
“Yes, we’re concerned,” said Mike Booth, president of UAW Local 961 in Warren. “All the members are concerned about the corruption in the UAW.”
Ashton's criminal defense lawyer, Jerome Ballarotto of Trenton, N.J., did not respond to a message seeking comment Thursday.
Federal court records portray Ashton as a powerful union boss who steered a $4 million deal to his personal chiropractor and then collected cash kickbacks hand-delivered to his home near the New Jersey shore.
One part of the alleged conspiracy stems from a failed business deal in 2010. At the time, Ashton was a regular client at Oxford Rehabilitation Center, a clinic in Philadelphia operated by physical therapist Wendy Wang and chiropractor Marc Cohen.
"I've met Joe, he came to our office a few times when his back hurt; so did his brother John," Wang told The News on Friday.
In 2010, prosecutors say "Union Official 1" convinced Cohen to loan $250,000 to a construction company owned by one of Ashton’s associates, according to federal court records. In an interview Friday, Wang said she and Cohen loaned the money.
By 2012, the construction company had stopped repaying the loan. By September 2012, the debt had ballooned to $283,000 and led to a lawsuit, according to court records.
"I was really pissed off," Wang told The News on Friday. "The loan was a total loss."
So "Union Official 1" pitched a plan to repay the construction loan — and help himself. In 2012, the UAW was planning to buy more than 50,000 watches. “Union Official 1” contacted Cohen, telling him to create a company that could win the contract and supply the watches, according to the government.
“Union Official 1 suggested that the profits from the watch contract would repay...what he was owed on the $250,000 loan to the construction company,” prosecutors wrote in the Grimes case.
"Union Official 1" drafted the deal, helped award it to his chiropractor and demanded a $250,000 kickback in spring 2013, according to court records. Cohen's watch contract described by prosecutors included steep profits. The watches cost less than $2.3 million to produce, but the contract was for $3.97 million.
Cohen, 58, a chiropractor who lives in Cherry Hill, New Jersey, confirmed in an interview with The News on Thursday that he is the watch contractor identified in federal court records.
“Right now I am with patients and it is not the appropriate time to discuss this,” Cohen said. He referred questions to his white-collar criminal defense lawyer, Paul Hetznecker, who declined comment.
Wang said Friday she never knew about the watch contract, did not receive any money and has not talked to the FBI.
"Of course this bothers me," Wang said Friday after learning about the watch contract. "I feel like I've been betrayed."
Federal prosecutors shielded the name of Cohen's watch company in court records, but New Jersey business records indicate a company called USA Countrywide LLC is registered to Cohen's house. The company was incorporated in August 2012, according to New Jersey business records. That is the same date listed by prosecutors in the Grimes case.
USA Countrywide's website is defunct, but an archived version of the website touts the company's watches and is decorated with American flags and a patriotic logo. The website includes watches featuring several union brands, including the UAW.
Cohen is a partner of AC Best Docs, a multi-discipline practice based in an office building in Linwood, New Jersey. AC Best Docs leases space at the building to the UAW, according to the union's annual Labor Department filings. The UAW has paid AC Best Docs more than $418,000 in rent in recent years.
Grimes also received $25,000 in kickbacks from the watch contract, a small piece of the $1.99 million he is accused of pocketing during the conspiracy, prosecutors said.
Grimes worked closely with UAW Vice President Cindy Estrada, who then headed the union's GM department and now leads its Fiat Chrysler Automobiles NV department; he sat alongside her on the UAW-GM Center for Human Resources board; and he served on the board of Estrada’s nonprofit, the Cynthia Estrada Charity Fund. The nonprofit has received almost $1.4 million in recent years, according to tax filings that do not reveal donor identities.
Estrada was unavailable for comment. Rothenberg, the UAW spokesman, would not answer whether Estrada was aware of the conspiracy that prosecutors say involved her right-hand-man.
The ongoing criminal investigation focuses on whether training funds were misappropriated, and if labor leaders at GM and Ford Motor Co. received money or benefits through their tax-exempt nonprofits.
Estrada headed the union's GM department until last year, when she was transferred to the Fiat Chrysler department by the union's new president, Gary Jones — a move seen by many industry insiders as a demotion within the union leadership.
Before her current post, she was a member of UAW Local 174 working for a family-owned promotions company called Impressions Specialty Advertising in Taylor. The News reported in April that federal agents had subpoenaed records from Impressions as part of the criminal investigation into whether UAW leaders received kickbacks after giving business executives contracts to produce union-branded clothes and trinkets.
MOBILE USERS: Trinkets and trash: A database of UAW spending on swag
The subpoenas shed light on the so-called "trinkets and trash" industry, a collection of companies vying for a piece of the more than $29 million spent in the last five years on promotion, advertising and UAW-branded items distributed at union rallies, conventions and factories. The items include shirts and lanyards, Frisbees and flash drives, pencils and ponchos, Kangol hats, key chains, and novelty items like bowling ball buffers.
Impressions is a family business headed by company President Louise Leveque of Dearborn. Husband Al Leveque is a company director, and son Jason Leveque has worked as sales manager.
In the promotions investigation, federal agents are probing whether company executives inflated the cost of UAW-branded clothes and trinkets and shared the extra money with UAW leaders.
Grimes was involved in another tainted contract in 2011, prosecutors said. This time, "Union Official 1" proposed buying 50,000 jackets using training center funds. The center, which is financed by GM, is overseen by a board split among GM and UAW officials.
Grimes recommended steering the contract to a contractor identified by prosecutors as "Vendor A."
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, who sources say is Ashton, received the money in 2012.
Two years after receiving the money, Ashton got a promotion. In 2014, he was appointed to GM's board of directors, helping oversee the Detroit automaker.
The case against Grimes, meanwhile, presents a widening scope in the corruption scandal against the UAW, which risks a “downward spiral” at a time when the union is looking to rebuild its clout after falling membership numbers. That includes attempting to organize auto plants without collective bargaining efforts.
Federal investigators are questioning UAW officials' use of almost $1 million of membership dues on condominiums, liquor, food and golf in California, where Gary Jones held annual conferences before becoming president.
“This corruption, to the extent there are repeated stories and could be more widespread than one unit, I think that is going to hurt the union’s power,” said Erik Gordon, a professor at the University of Michigan’s Ross Business School, “which means it’s going to hurt the union’s power to get what its members want. The members will start to be less supportive, not because of the corruption, but because of its decreased power. The union claiming that it’s isolated and committed to integrity is not too far from doing a credibility splat.”
At its annual convention in June 2018, the UAW introduced its “clean slate” agenda, a series of policies it already had implemented and would implement to prevent corruption. Union leaders also announced a three-bid process to procure from vendors. Other policies included stricter oversight of UAW staff expenditures and joint training center finances, requirements for disclosing conflicts of interest and banning gifts.
Behind the scenes, however, the alleged conspiracy involving Grimes, Ashton and others continued, prosecutors said.
Although the UAW’s clean-slate plan is a step forward, Gordon said, it won’t root out corruption. The most effective way to address the scandal, he said, is for the union to hire outsiders to conduct a broad-reaching and deep investigation with a zero-tolerance policy.
The criminal case against Estrada's former assistant puts union leadership in a difficult position as it negotiates with the Detroit Three automakers, said Michelle Krebs, an analyst at Cox Automotive, adding that the union needs to rebuild credibility.
“There’s trust that’s been breached with the membership,” Krebs said. “They’ve got to make sure they’re self-policing. Do clean house, if it’s necessary. The federal government is doing the job, and that really should be the union leadership taking the lead on that.”
rsnell@detroitnews.com
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Twitter: @robertsnellnews