U.S. corruption probe involving lavish parties, champagne hits another top UAW official

DETROIT/WASHINGTON, (Reuters) - Just two days before the UAW’s contracts with Detroit automakers were due to expire, U.S. prosecutors arrested and charged a senior union official on Thursday with embezzlement, releasing a complaint that alleges he spent member dues on lavish parties for union leaders, with liquor, cigars and women to light them.

Negotiators from the United Auto Workers already faced contentious talks with General Motors Co, Ford Motor Co and Fiat Chrysler Automobiles NV (FCA) , focusing on thorny issues like healthcare costs and profit-sharing at a time when U.S. new vehicle sales are declining.

But Saturday’s deadline could be overshadowed by the latest revelations in a mushrooming corruption scandal, of vast sums being spent on lavish entertainment by labor leaders - including $440 bottles of champagne originally created to please a Russian czar and scantily clad women to light union leaders’ cigars.

The union had hoped to put the federal probe behind it by electing Gary Jones, a former regional director for the union, as president in 2018. He was chosen as he seemed far removed from the scandal.

But Vance Pearson, 58, served as Jones’ second in command from 2016 to 2018 and replaced him last year as director of the UAW’s socalled “Region 5,” which covers 17 western and southwestern U.S. states.

Pearson’s arrest comes just two weeks after the FBI conducted searches including at Jones’ home, as part of an ongoing corruption probe into illegal payments to union officials.

Jones has not been charged with any wrongdoing. A lawyer for Jones did not immediately respond to a request for comment.

Adding to intrigue, the complaint makes frequent reference to someone identified only as “UAW Official A,” saying government agents had seized $30,000 in cash from the individual’s residence.

Steven Bernstein, a Tampa-based labor attorney at Fisher Phillips LLP, said the latest charges create a “difficult dynamic” for the union in talks with automakers.

“This does have the potential to compromise whatever leverage the union’s leaders think they have,” he said.

In a statement, the UAW said “we strongly believe that the government has misconstrued any number of facts and emphasize that these are merely allegations, not proof of wrongdoing.”

Last week, the UAW said it would target GM first out of the Detroit automakers for focused contract talks. GM said in a statement it was “outraged and deeply concerned” by the revelations.

“These serious allegations represent a stunning abuse of power and trust,” the company said.