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Speaker 1: Welcome to the Bloomberg Law Podcast. I'm June Grosso. Every

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Speaker 1: day we bring you insight and analysis into the most

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Speaker 1: important legal news of the day. You can find more

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Speaker 1: episodes at the Bloomberg Law Podcast, on Apple podcast, SoundCloud,

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Speaker 1: and on Bloomberg dot com slash podcasts. It's a lawsuit

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Speaker 1: unlike any scene before in the auto industry. General Motors

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Speaker 1: stunned its rival Fiant Chrysler by slapping it with a

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Speaker 1: racketeering lawsuit, accusing it of inflicting billions of dollars in

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Speaker 1: damages by bribing United under Workers brass in a year's

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Speaker 1: long corruption scheme, and implicating the late chief executive officer

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Speaker 1: Sergio Marcione for the first time. Joining me is former

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Speaker 1: federal prosecutor Peter Henning, a professor at Wayne State University

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Speaker 1: Law School. Peter Big automakers are used to dealing with

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Speaker 1: major litigation brought by regulators and consumers, but not brought

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Speaker 1: by one another and not involving racketeering. Tell us about

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Speaker 1: the lawsuit, Well, what Real Motors is doing is taking

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Speaker 1: a very aggressive position, and they are claiming that because

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Speaker 1: of corruption in the UAW and in the upper reaches

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Speaker 1: of Fiat Chrysler, that Chrysler got a much better deal

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Speaker 1: in the labor agreement than General Motors did, and that

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Speaker 1: that gave them a much better cost advantage over General Motors.

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Speaker 1: They even have a graphic in the complaints showing the

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Speaker 1: differences between what Chrysler had to pay for its workers,

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Speaker 1: including temporary workers, and what General Motors have to pay.

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Speaker 1: So this is a rarity certainly where you see a

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Speaker 1: reco lawsuit filed against a competitor. It's just not done

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Speaker 1: very often. And that's going to be a challenge for

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Speaker 1: General Motors in trying to prove their case exactly. So

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Speaker 1: explain what they have to and how that might be

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Speaker 1: difficult when they've had such success in the last decade. Well,

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Speaker 1: that's going to be the interesting point here is that

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Speaker 1: for any RICO lawsuit, you have to show that there

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Speaker 1: was a pattern of racketeering activity. Well, I think they

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Speaker 1: have pretty good evidence of that from all the guilty

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Speaker 1: pleas and that there was a Rico enterprise. But the

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Speaker 1: key to any RICO lawsuit is proving that General Motors

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Speaker 1: was harmed in its business or property. And given how

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Speaker 1: well General Motors has done over the last ten years

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Speaker 1: since they emerged from bankruptcy. I'm not sure they're going

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Speaker 1: to be able to show that the agreement that Fiat

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Speaker 1: Chrysler made with the UAW actually harmed General Motors. That

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Speaker 1: that's going to be the major sticking point here. How

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Speaker 1: are they going to show that they were hurt by

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Speaker 1: an agreement made between Fiat Chrysler and the UAW. So

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Speaker 1: that I think is the biggest challenge that General motorspaces

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Speaker 1: in this case is proving that their business and their

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Speaker 1: property was harmed by what Fiat Chrysler did. Does GM

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Speaker 1: have an advantage because of the long running Justice Department

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Speaker 1: investigations into financial wrongdoing at the Union and Fiat and

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Speaker 1: also those guilty please you spoke of. Certainly that helps

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Speaker 1: prove the pattern of racketeering activity, which is one of

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Speaker 1: the keys to establishing a RICO violation. With all those

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Speaker 1: guilty please, the General Motors has quoted extensively from them

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Speaker 1: and said this was wire fraud, mail fraud, and that

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Speaker 1: can be the basis for a RICO lawsuit. But the

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Speaker 1: tough part is going to be for General Motors to

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Speaker 1: show that whatever happened at Fiat Chrysler and the corruption

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Speaker 1: not only in Fiat Chrysler senior, but also in the

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Speaker 1: u a W senior ranks in their negotiation that that

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Speaker 1: actually harmed General Motors. General Motors is kind of the

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Speaker 1: fallout here that Fiat Chrysler got a good deal out

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Speaker 1: of it. They got to use temporary workers and things

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Speaker 1: like that, and that was a real bone of contention

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Speaker 1: in the recent negotiations. But how much of an advantage

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Speaker 1: did that give Fiat Chrysler. Chrysler is the smallest of

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Speaker 1: the three American automakers, and so did it really hurt

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Speaker 1: General Motors when General Motors has been making really enormous

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Speaker 1: profits over the last decade. Peter, should the u a

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Speaker 1: W be a part of this lawsuit? That's a good question.

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Speaker 1: If you read the beginning of their lawsuit, they say,

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Speaker 1: we're not touching the UAW and we're not having anything

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Speaker 1: to do with accusing the UAW of corruption. Now though

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Speaker 1: they identify certain individual all u AW officials in their

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Speaker 1: lawsuit and say because of the corruption involving Fiat Chrysler,

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Speaker 1: that that was how the union was corrupted and that's

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Speaker 1: how they may have gotten a much better deal out

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Speaker 1: of the u a W for Fiat Chrysler. But they're

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Speaker 1: not going directly after the union. That we've seen that

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Speaker 1: the president of the u a W has stepped down

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Speaker 1: and their efforts there to try to fire him. But

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Speaker 1: GM is not going to pick a fight with the

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Speaker 1: u a W because they have some of the U

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Speaker 1: a W workers on their staff that that is just

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Speaker 1: not worth the fight for them. But if you're alleging racketeering,

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Speaker 1: racketeering involving FIAT and the union, how can you leave

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Speaker 1: the union out? Well, they made a conscious decision here

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Speaker 1: to just not name the u a W or any

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Speaker 1: senior members of the u a W as being participate

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Speaker 1: tants in this racketeering enterprise. Instead, they've only focused on

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Speaker 1: the individuals who pleaded guilty. And so I think general

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Speaker 1: motors here is taking the position that we don't want

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Speaker 1: to pick a fight with the u a W. We

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Speaker 1: just settled our contract with them, we just negotiated a

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Speaker 1: new four year agreement, and doesn't do them any good

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Speaker 1: to pick a fight with the U a W. I

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Speaker 1: think the answer to that question is no, that it

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Speaker 1: really doesn't do them any good to name the U

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Speaker 1: a W as a defendant because it's just there's no

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Speaker 1: real benefit to that for General Motors. Their real target

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Speaker 1: here is Fiat Chrysler, and they are going all in

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Speaker 1: and very aggressively in attacking Fiat Chrysler, including its former

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Speaker 1: CEO Sergio Marcioni, claiming that he was part of a conspiracy.

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Speaker 1: And so I really think this is designed more to

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Speaker 1: attack Fiat Chrysler and not the U a W. The

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Speaker 1: last point interests me because this is the first time

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Speaker 1: that Marcioni has been implicated in the corruption scheme. Does

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Speaker 1: GM have something that no one else has? What's the reason?

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Speaker 1: It's interesting that you see Marcioni involved at least around

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Speaker 1: the negotiations, and so there was a benefit given to

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Speaker 1: the U a W negotiator, General Hallyfield that Marcioni gave

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Speaker 1: him a what was claimed to be a very expensive

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Speaker 1: watch and then said, oh, this is worth less than

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Speaker 1: fifty dollars. Well, that's something that GM has identified in

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Speaker 1: its lawsuits saying no, no, no, Marcioni was involved in this.

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Speaker 1: And therefore this goes all the way to the top.

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Speaker 1: And so to prove their conspiracy claim, their rico conspiracy claim,

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Speaker 1: they need to include senior Fiat Chrysler officials in that

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Speaker 1: and show that the Chrysler got the benefit of very

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Speaker 1: friendly negotiations with the U a W. Chrysler says that

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Speaker 1: it was astonished by the lawsuits denied the allegations. Instead,

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Speaker 1: it assumed that GM was trying to disrupt the contract

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Speaker 1: negotiations with the U a W and it proposed merger

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Speaker 1: with pougeot. Is the timing of this suspicious? Well, you know,

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Speaker 1: GM is not happy about what has happened at Chrysler.

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Speaker 1: You look at the timing here, and it's while the

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Speaker 1: U a W and Chrysler are in the middle of

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Speaker 1: negotiating their agreement, and the U a W has already

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Speaker 1: settled with General Motors and Ford, so there's only one

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Speaker 1: left that they have to negotiate with. So if I'm

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Speaker 1: FIA Chrysler, I am very suspicious of the timing of

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Speaker 1: GM's lawsuit. But GM has decided that they are going

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Speaker 1: to be very very aggressive here and we'll see what

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Speaker 1: comes out during the course of discovery in this case,

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Speaker 1: if VR Chrystler is not able to get the lawsuit

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Speaker 1: dismissed at an early stage, and so this could drag

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Speaker 1: on for three or four or five years. RICO cases

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Speaker 1: are not quickly resolved. They often take a great deal

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Speaker 1: of time because you have to prove the pattern of

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Speaker 1: racketeering activity and the rico enterprise and harm to your

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Speaker 1: business or property. So all three of those are not

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Speaker 1: going to be easy to prove. But GM has some

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Speaker 1: very aggressive counsel, including Kirkland and Alis, and so I

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Speaker 1: think they are going all in on this. Thanks Peter.

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Speaker 1: That's Peter Henning, a professor at Wayne State University Law School.

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Speaker 1: Thanks for listening to the Bloomberg Law Podcast. You can

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Speaker 1: subscribe and listen to the show on Apple Podcasts, SoundCloud,

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Speaker 1: and on Bloomberg dot com slash podcast. I'm and Rosso.

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Speaker 1: This is Bloomberg. M m hm