A Venetian wedding, luxury watches, and $7,000 steak dinners: How Fiat Chrysler seduced union officials in what General Motors says was years of bribery and corruption (GM, FCA)

The alleged corruption that eventually led to the resignation of a high-ranking union official was on full display in a lawsuit filed by General Motors against its rival Fiat-Chrysler on Thursday.

In a bombshell 95-page complaint, GM accused executives of its crosstown Italian rival of bribing United Auto Workers officials in order to undercut competition and violating federal labor law in the process.

“As part of this bribery scheme, and to lock in the competitive efficacy of the purchased benefits, concessions, and advantages for FCA, GM was denied similar union commitments and support,” the racketeering suit, filed in Detroit federal court, says.

Since 2009, GM alleges that FCA, in cahoots with its now-deceased former chief executive Sergio Marchionne and UAW executives spent millions on bribes that included a Venetian wedding, luxury watches, resort outings, and more, all of which went underreported (if reported at all). In some cases, GM alleges, fake businesses, charities, and even a fake hospice were used as fronts to move the money.

“For example,” GM writes, “in February 2010, Marchionne, acting in the interest and as an agent of FCA Group, gave [former UAW official General] Holiefield a custom-made Terra Cielo Mare watch worth several thousand dollars in direct violation of the Taft-Hartley Act.”

From there, things got even more complex.

“As the bribery scheme grew in complexity and depth,” the complaint says, union executives “Holiefield and Morgan, with FCA Group’s knowledge, used false front businesses, including Monica Morgan Photography, Wilson’s Diversified Products, and even a fictitious hospice organization, in an attempt to launder funds from the NTC and LTLOF.”

(NTC in the above quote refers to a joint training center financed by FCA and the UAW. LTLOF is the “Leave the Light on Foundation,” a nonprofit controlled by UAW official Holiefield.)

Marchionne personally approved FCA’s financing of the now-deceased Holiefield’s wedding in Venice in 2015, GM alleges in the suit. That same year, the automaker claims, the union used FCA funds for lavish golf-and-steak outings in Palm Springs and a villa rental nearby.

From the suit:

  • $7,569.55 on January 9, 2015 at LG’s Prime Steakhouse,
  • $1,267.79 at Indian Canyons Golf Resort,
  • $4,587.04 on January 18, 2015 at LG’s Prime Steakhouse,
  • $3,372.74 on January 23, 2015 at Spencer’s Restaurant,
  • $6,200.05 on January 24, 2015 at Palm Springs Steak & Chop Restaurant, and
  • $4,147.74 on January 28, 2015 at Melvyn’s Restaurant.

All of these alleged bribes helped FCA net a better deal with the union in 2015, saving the once-bankrupt automaker plenty of cash. As part of that agreement, the union lifted a cap on “tier two” workers, allowing FCA to hire more of the cheaper, less-skilled workers, and gain a leg up on the competition, the lawsuit claims.

Because of those alleged disadvantages, GM is demanding a jury trial and relief for “substantial damages,” though the company did not specify an amount beyond “billions.”

That pluralized word could be key.

Fresh off the heels of a 40-day strike that ate into third-quarter earnings and is expected to take an even bigger chunk out of this quarter’s financials, GM will likely be looking to recoup as much as possible.

“There is reason to believe this amount is at least $6 billion and — under one scenario we would regard as extreme high-end — could potentially be $15 billion,” Ryan Brinkman, an analyst at JPMorgan, told clients in a note Thursday.

Based on the math of a $4 per hour disadvantage for every worker, JPMorgan estimates that GM was spending about $416 million per year more than FCA. Payback for those could be huge for the company and shareholders, even if the spat ends in a settlement instead of a jury trial.

“We believe investors may not have fully considered its potentially materially positive ramifications [of the suit],” JPMorgan said.

In response to the lawsuit, Fiat Chrysler said it was “astonished.”

“We can only assume this was intended to disrupt our proposed merger with PSA as well as our ongoing negotiations with the UAW,” the automaker said. “We intend to vigorously defend against this meritless lawsuit and pursue all legal remedies in response to it.”‘

The union, for its part, appears to have admitted to some of the wrongdoing alluded to by GM.

On Thursday, not long after the suit had been filed, current UAW president Gary Jones resigned. Simultaneously, the executive board voted to remove him from the board, calling it a “somber day.”

“We are committed at the UAW to take all necessary steps including continuing to implement ethics reforms and greater financial controls to prevent these type of charges from ever happening again,” acting president Rory Gamble said.

Read the full lawsuit below:

  General Motors’ FCA lawsuit by Insider Inc. on Scribd

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