Kalea Hall and Robert Snell
The Detroit News
Published 6: 37 PM EDT Sep 4, 2019
Ann Arbor — In the continuing federal crackdown of corruption inside the United Auto Workers, a former assistant to a union vice president told a federal judge Wednesday that he committed financial crimes because he was facing economic hardship.
Mike Grimes, 65, of Fort Myers, Florida, pleaded guilty in the federal courtroom on charges of wire fraud conspiracy and money laundering. The government said Grimes received $1.99 million in kickbacks from union vendors.
Public records indicate Grimes was facing tax problems in 2013, but he was receiving kickbacks years before the tax issue emerged and afterward while amassing a multimillion-dollar real estate portfolio.
The guilty plea is the latest domino in a widening federal investigation into corruption at Solidarity House and in the union’s joint training centers funded by Detroit’s three automakers. Nine people so far have been convicted, a former UAW vice president is serving a 15-month sentence in federal prison, and last week federal authorities raided the homes of President Gary Jones and his predecessor, Dennis Williams.
Grimes, administrative assistant to Vice President Cindy Estrada when she headed the UAW’s GM Department, could face up to 20 years for wire fraud and 10 years for money laundering, but the government is recommending he serve 46 to 57 months. The length of his sentence is ultimately up to U.S. District Judge Bernard Friedman; sentencing is scheduled for Jan. 14.
As part of the plea, Grimes agreed to forfeit all property he received through the wire fraud and money-laundering schemes. He agreed to forfeit $1.5 million, money he personally obtained as bribe payments from the vendors.
Vendors were awarded contracts from the UAW-GM training center to produce UAW-branded merchandise in exchange for paying bribes and kickbacks. The conspiracy started in 2006 and lasted until July 2018, according to the government. During that time, Grimes worked alongside Estrada and was paid $150,574 a year.
Starting in 2010, Grimes received almost $900,000 worth of kickbacks from a union vendor, prosecutors said. In 2011, the same union contractor gave Grimes an additional $530,000.
Two years later, Grimes ran into tax problems. In June 2013, the IRS filed a lien against Grimes and his wife, and accused the couple of failing to pay almost $213,000 in income taxes. The tax lien was filed on a $785,000 home Grimes owned overlooking Lake Fenton near Flint.
Two months later, federal prosecutors say Grimes received $12,500 in kickbacks from a union vendor. Within weeks, the tax problem disappeared. The IRS released the tax lien in September 2013.
And Grimes kept receiving kickbacks, according to the government. In December 2013, he received another $12,500 in kickbacks from an unidentified union vendor.
By February 2017, Grimes appeared flush with cash. He and his wife took out a $284,000 mortgage and bought a new $730,000 home in Fort Myers, according to property records. He also bought a 2017 Jeep Wrangler. Those assets are expected to be forfeited to the government and used to pay a portion of the $1.5 million that he owes.
Grimes kept receiving kickbacks through 2017, according to court records. His real-estate dealings continued into the next year: In January 2018, Grimes sold a $605,000 vacation home overlooking Mullett Lake in Cheboygan.
Grimes was administrative assistant to Estrada until last year. He is the ninth person convicted in an ongoing UAW corruption investigation by the federal government. Grimes is the first labor official assigned to General Motors Co. convicted in the scandal.
Michael Manley, Grimes’ attorney, wouldn’t comment on whether Grimes is cooperating with the government in the UAW investigation.
“Mr. Grimes is devastated by his actions,” Manley said after the hearing. “He has [spent] over 30 years devoting his time to the UAW, he loves the UAW. He’s crushed by what he has done to their reputation and has owned up to his actions and is going to suffer great consequence because of that.”
The UAW released a statement Wednesday, that read: “The conduct admitted by Mr. Grimes in his plea today is shocking and absolutely disgraceful.
“In June 2018, as part of our Clean Slate reform agenda, the UAW adopted and reaffirmed a strict three-bid process for vendor purchasing, a policy that must be followed by all UAW officials and employees, and similar strict bid-process policies have been implemented at the Joint Program Centers, to ensure this type of conduct cannot be repeated. That is among the stronger reforms and financial controls that have been adopted by the UAW and each of the Joint Program Centers.
“Our union will not be distracted from fighting for our members and negotiating strong labor agreements with General Motors, Ford and FCA.”
In a statement, GM said the company “is deeply disturbed by the conduct of Michael Grimes and other union officials as uncovered by the government’s investigation and admitted to by Mr. Grimes in today’s hearing. These actions represent a stunning abuse of power and trust. There is no excuse for union officials to enrich themselves at the expense of the union membership they represented — and to steal [Center for Human Resources] funds invested by GM for training our hourly employees.”
Grimes and two other unnamed union officials were allegedly enriching themselves by deceptively soliciting, influencing and obtaining contracts for two vendors. Grimes and the two unnamed UAW officials demanded and accepted hundreds of thousands of dollars from two vendors, prosecutors said.
The Detroit News previously reported that the two other unnamed officials accused in the vendor kickbacks scheme are former UAW Vice President Joe Ashton and his top lieutenant, Jeff Pietrzyk, according to multiple sources. Neither has been charged.
In 2011, Ashton, Pietrzyk and Grimes sat on the UAW team that negotiated a new contract with GM, serving alongside former president Williams.
Meanwhile, contentious negotiations are heating up before the Sept. 14 contract expiration. On Tuesday, the UAW announced GM as the “lead company” it would negotiate with for the new four-year contract.
Frank Hammer, a former UAW/GM international representative from 2000 to 2006, and president and chairman of UAW Local 909 in Warren, attended Grimes’ plea hearing on Wednesday. He worked with Grimes — “a very personable, nice guy” — at Solidarity House in the UAW/GM department.
While Hammer worked inside Solidarity House, he said he didn’t see any kind of corruption happening like what Grimes is accused of committing. But he said that doesn’t mean it wasn’t happening.
In a prepared statement for the news media, Hammer said Grimes’ criminal behavior is the result of a culture that “placed partnership with companies ahead of defense of the members the UAW represented.”
“I can see that the culture is what brought him down and brought him into this disgrace,” Hammer told The News after the hearing, adding that he wants to see GM management also held accountable. “I don’t think this could have been going on without their knowledge.”
Paul Wohlfarth, a retiree of Fiat Chrysler Automobiles NV, didn’t know Grimes but went to the hearing to represent “honest UAW workers. Hopefully we can root out these bad apples.”