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Friday, 26 June 2020 19:17

Judge Orders GM, Fiat Chrysler CEOs to Meet Over Racketeering Case

Written by Breana Noble and Kalea Hall, The Detroit News
Fiat Chrysler CEO Sergio Marchionne, left, and UAW President Dennis Williams embraced at the start of contract talks in 2015. GM charges Marchionne orchestrated a bribery conspiracy to corrupt three rounds of bargaining with the UAW in an effort to harm and take over Detroit's biggest automaker. Fiat Chrysler CEO Sergio Marchionne, left, and UAW President Dennis Williams embraced at the start of contract talks in 2015. GM charges Marchionne orchestrated a bribery conspiracy to corrupt three rounds of bargaining with the UAW in an effort to harm and take over Detroit's biggest automaker. Max Ortiz, The Detroit News

Index

Calling the litigation of General Motors Co.'s racketeering lawsuit against Fiat Chrysler Automobiles NV "a waste of time and resources," a federal judge on June 23 took the unusual step of ordering the companies' two CEOs to meet within the next week to reach a "sensible" resolution.

Last November, GM invoked federal racketeering law often associated with battles against organized crime to accuse Fiat Chrysler's late CEO, Sergio Marchionne, of orchestrating a bribery conspiracy to corrupt three rounds of bargaining with the United Auto Workers in a bid to harm and take over Detroit's largest automaker. 

 

GM says it lost "billions" from the arrangement, while Fiat Chrysler calls the allegations "meritless" and is seeking to dismiss the case.

 

During a motion-to-dismiss hearing, U.S. District Judge Paul Borman scrutinized the merits of GM's case and the prospect of continuing the dispute as the country faces challenges brought on by the coronavirus pandemic amid calls for reforms of the U.S. justice system.

 

Borman ordered GM CEO Mary Barra and Fiat Chrysler CEO Mike Manley to "meet face-to-face, in good faith and with goodwill" and provide an update to him at noon July 1.

 

“If this case goes forward, there will be years of contentious litigation,” Borman said. “These legalities will not only divert and consume the attention of key GM and FCA executives from their day jobs … but also prevent them from fully providing their vision and leadership on this country’s most pressing social justice and health issues.”

 

Most judges seek to settle cases, said Erik Gordon, a former lawyer and professor at the University of Michigan's Ross Business School. But those negotiations typically are done between the parties' attorneys who are the experts on the case---not the CEOs.

 

"It is intrusive of the CEOs at a very critical time for them," Gordon said. "It's not just going to the meeting but preparing for this meeting. And they will want to be well-prepared for this meeting. For a judge to say to rearrange your schedule and make this your top priority is very intrusive" — and likely to interfere with vacations scheduled for the traditional July 4 shutdown.

 

"The fact that GM has not settled and that the judge has now resulted to a strong, almost desperate move on the judge’s part leads you to think that GM is just standing tough and that GM thinks it can prove its case," he added. "Otherwise, the judge would have an easier time because what is harder to prove than a RICO case?"

 

GM's accusations against Fiat Chrysler stem from a five-year federal investigation into payoffs from Fiat Chrysler executives to UAW officials dating to days after Chrysler Group LLC emerged in 2009 from bankruptcy with $12.5 billion in taxpayer money under the control of a foreign company, Italy's Fiat SpA.

 

"GM has a very strong RICO case and we look forward to constructive dialogue with FCA consistent with the Court’s order," the Detroit automaker said in a statement.

 

The federal investigation has resulted in the convictions of 14 people, including three former Fiat Chrysler executives, for bribing United Auto Workers officials with funds designated for training blue-collar workers. 

 

Fiat Chrysler and the training center it operates with the UAW have been designated co-conspirators in the government's probe into union corruption. The automaker is in negotiations to settle with the U.S. Justice Department, according to disclosures in Securities and Exchange Commission filings.

 

In a statement, FCA reiterated its belief the lawsuit should be withdrawn: "We therefore acknowledge Judge Borman's concerns, and look forward to meeting to discuss them and ideally put this matter behind us."


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