the UAW Prepares to send him a cadillac from the bosss
Feds Charge Former UAW Vice President Ashton With Fraud, Money Laundering
Latest charge comes days after UAW President Gary Jones stepped aside on leave of absence
Federal prosecutors charged former United Auto Workers vice president and ex-General Motors Co. GM 0.50% board member Joe Ashton with conspiracy to commit fraud and money laundering, according to court documents filed Wednesday, the latest in a yearslong criminal investigation into corruption in the union’s top ranks.
Mr. Ashton, who retired from the UAW in 2014 and left the GM board in 2017, is accused of helping to orchestrate a scheme to personally enrich himself and other UAW officials by steering contracts to vendors in exchange for bribes and kickbacks, prosecutors alleged.
GM said in a statement it was disturbed by the charges involving Mr. Ashton, and the company wasn’t aware of the alleged illegal conduct. Acting UAW President Rory Gamble said in a statement the charges were inexcusable and violate the union’s standards of conduct.
Mr. Gamble, later said in an interview, he plans to present reforms to the UAW’s governing board in a private meeting Thursday.
“We’re going to have to embrace and adopt some very serious proposals and put in place some very serious controls to make sure that this does not happen again,” Mr. Gamble said. He declined to provide specifics.
Mr. Ashton’s attorney, Jerome A. Ballarotto of New Jersey, didn’t immediately return a phone message requesting comment.
Mr. Ashton, who ran the UAW’s GM department and led negotiations with the auto maker earlier in the decade, is now the 13th person charged in the Justice Department’s widening criminal probe into allegations of corruption, bribery and other financial misconduct among top-ranking officials at the UAW, one of the nation’s oldest unions. The investigation has potentially implicated UAW President Gary Jones, who over the weekend stepped aside to take a leave of absence. Mr. Jones hasn’t been charged and his attorney said he took voluntary leave and didn’t face pressure to do so.
Mr. Ashton is also the second former UAW vice president to be charged in the investigation, which first became public in 2017 and had initially focused on misuse of UAW training-center funds at Fiat Chrysler Automobiles NV. Fiat Chrysler has said the misconduct was perpetrated by a small group of individuals acting in their own interest.
The latest charges mark another setback for the UAW leadership at a time when union officials are still trying to secure new labor contracts at Ford Motor Co.and Fiat Chrysler. The UAW late last month reached a new labor agreement with GM after a 40-day nationwide walkout.
The UAW’s governing board is also trying to move past internal divisions over the terms and timing of Mr. Jones’s leave of absence and mend the union’s reputation, people familiar with the matter said. On Saturday, six of the board’s 13 voting members voted against the union leader’s request for paid leave, but Mr. Jones prevailed as he was able to cast a vote, the people said.
As part of the alleged fraud scheme, Mr. Ashton in 2012 and 2013 arranged a nearly $4 million contract for his personal chiropractor to provide more than 50,000 custom-made wristwatches to union members, according to the charging document filed in a U.S. federal court in Michigan. The money came from a jointly run UAW-GM training center in Detroit, the document says.
GM and the UAW agreed to close the training center in a new labor contract approved late last month by GM workers.
In exchange for arranging the contract, Mr. Ashton, along with two other UAW officials, accepted hundreds of thousands of dollars in bribes and kickbacks from the chiropractor, prosecutors alleged. The chiropractor visited Mr. Ashton’s house regularly to deliver cash payments of $5,000 to $30,000, prosecutors said.
The watches were delivered to the training center in 2014 but never distributed to workers and remain stored in a warehouse, the document said.
The allegations involving Mr. Ashton come as federal investigators continue to build a case that they say has also uncovered evidence of UAW leaders using union funds to pay for extravagant trips, cigars, high-end liquor and golf clubs. Some of the most lavish spending, federal prosecutors say, happened on trips to Palm Springs, Calif., for conferences hosted by Mr. Jones when he was the top official at UAW Region 5.
A number of mid-level and top ranking UAW officials, two of which were close associates of Mr. Jones, have already been charged or convicted in the criminal probe. According to a charging document filed by federal prosecutors, Edward Robinson, a former UAW Region 5 official, allegedly split embezzled union dues with an unnamed official referred to as “UAW Official A.” That unnamed official is Mr. Jones, a person familiar with the investigation said.
Mr. Jones’s attorney J. Bruce Maffeo hasn’t commented directly on the investigation.
Mr. Ashton was appointed to GM’s board of directors in 2014 on behalf of the voluntary employees’ beneficiary association, or VEBA, a major GM stockholder which administers health-care benefits for UAW-represented retirees at GM.
—Mike Colias contributed to this article.
Public Pension Plans Continue to Shift Into U.S. Stocks
47% of plans’ assets were in U.S. stocks in third quarter, the most since 2007
As the bull market enters its 11th year, state and local pension plans are piling on risk, as they try to make up shortfalls.
Public plans had a median 47.3% of their assets in U.S. equities at the end of the third quarter, according to database Wilshire Trust Universe Comparison Service. That is more than they have had since 2007 and up from 44.1% a year earlier.
Taking on more exposure to stocks is a riskier bet, especially as global economic growth is slowing and talk of a potential recession has grown louder. Those risks can translate to consequences in a decline: Big hits to pension funds’ stock portfolios during the financial crisis were followed by a wave of benefit cuts for government workers hired since then.
Retirement systems that manage money for firefighters, police officers, teachers and other public workers are banking on market returns of 7% or more to help cover shortfalls. State and local pension plans have about $4.4 trillion in assets, according to the Federal Reserve, $4.2 trillion less than the value of promised future benefits.
“They are looking for risk and finding it in the equity market, and historically they have been benefiting from that,” said Robert J. Waid, managing director at Wilshire Associates. “The concern is going to be when and if that changes.”
Many plans have also added new kinds of risk since the crisis. Alternative investments such as private equity made up a median 5.6% of public plan portfolios at the end of the third quarter, the most since Wilshire TUCS began collecting the data. Some plans have also shifted money out of more conservative investments such as bonds.
Total equity allocations, including international stocks, have risen as high as 59.4% in the past decade, according to the data, and stood at 57.4% of assets as of the end of the third quarter.
Pension-fund returns can have profound impacts on a city or state because when returns fall short, the amount the government must contribute increases, potentially diverting money from other public services.
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Keith Brainard, research director of the National Association of State Retirement Administrators, said public pension funds base their decisions about how to allocate on a variety of factors including a very long-term investment horizon. As equity allocations have grown, he said, “The question in the mind of some might be, ‘Oh, shouldn’t you pare that back?’ And the response from a professional investor might be, ‘No, we’re looking at the next 20 or 30 years, and my models are telling me we should keep going with it.’”
The decadelong bull market has buoyed the holdings of public pensions, whose median returns averaged 8.57% a year for the 10 years ending in the third quarter, according to Wilshire TUCS. These retirement funds still face significant shortfalls because many pension funds have relied on overly optimistic investment-return targets that kept annual contributions low.
Meanwhile, some state and local governments facing budget pressure repeatedly decided not to make the full contributions recommended by their actuaries. Courts have also blocked some government efforts to reduce benefits for existing workers.
The $25.3 billion Teachers’ Retirement System of Alabama has spent the past decade with much of its investments in the stock market. It now has on hand nearly 72% of the assets it needs to cover future benefits.
As of Sept. 30, the fund has 50.33% of holdings in its domestic equity portfolio, up from 45.9% in 2007, though the fund now groups some private investments under domestic equity that it didn’t in 2007, said Chief Investment Officer Marc Green. He said cash holdings now amount to about 8%, compared with 3.5% in 2007, insulating the fund from the risk of having to liquidate stocks at unappealing prices.
“We have money sitting on the sidelines not exposed to risk assets,” Mr. Green said.
Pension funds are also being somewhat more conservative than before the crisis when anticipating what they expect to earn on their investments. Major public plans projected average long-term investment returns of 7.2% a year in 2018, compared with 7.9% in 2007. If governments are able to meet their projections, public pension assets on hand will be enough to cover roughly 73% of promised future benefits, according to a study by the Center for Retirement Research at Boston College.
Write to Heather Gillers at heather.gillers@wsj.com
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