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UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
In re Petition of:

Case Number 18-51223

UAW-CHRYSLER SKILL DEVELOPMENT
AND TRAINING PROGRAM,

Honorable Paul D. Borman

In the Matter of:
UNITED STATES OF AMERICA,

Case Number 17-20406

v.
D-2 ALPHONS IACOBELLI,

Defendant.
________________________________/
RESPONSE TO THE NTC’S SUPPLEMENTAL BRIEF

DAVID A. GARDEY
ERIN S. SHAW
Assistant United States Attorneys
211 W. Fort Street, Suite 2001
Detroit, MI 48226
Phone: (313) 226-9100

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INTRODUCTION
The NTC has admitted that it does not accumulate financial assets or
resources, and that its only financial function is to “pass-through” FCA funds. The
Court’s hunch that the NTC is a “shill” for FCA could not be more apt. The NTC
still cannot establish that the crime of conviction is a crime against property or that
it suffered a loss. In insisting that this Court cannot deny its restitution claim unless
the United States establishes that the NTC “made dough,” the NTC misstates the law
and ignores the fact that it exists at the absolute behest of FCA and the UAW. The
MVRA was not designed to redistribute resources among bad actors, and this Court
should decline the invitation to do so. Such an exercise of the Court’s discretion is
most appropriate, given the NTC’s pending civil action which, as the Court already
acknowledged, “really deals with what we’re about here.” We elaborate below.
ARGUMENT
I.

The MVRA Does Not Apply.
A.

Conspiracy to Violate the Taft-Hartley Act Is Not a Crime Against
Property.
The NTC has abandoned its fraud theory, and its only remaining argument is

that it is a victim of the Taft-Hartley conspiracy. 1 The NTC claims that it is entitled

The NTC conceded at oral argument that “there’s no ability for the NTC to
recover” from Iacobelli on a fraud theory “other than the civil case which has been
filed,” and that the NTC was “seeking recovery in civil court” for fraud, “but we

1

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to restitution because its “funds were stolen.” The NTC concedes it cannot obtain
restitution for fraud because Iacobelli “was never charged in a fraud.” Hrg. Tr. at
12. By the same measure, the NTC cannot obtain restitution for the uncharged crime
of theft. See Govt. Resp. at 11-12.
The NTC’s reliance on United States v. Collins, 854 F.3d 1324 (11th Cir.
2017) is misplaced. First, the Collins court expressly stated that “there may be a
question about whether bribery is ‘an offense against property’ under the MVRA.”
Id. at 1335; see also United States v. McNair, 605 F.3d 1152, 1221(11th Cir. 2010)
(“We sua sponte note there is a potential issue of whether bribery is ‘an
offense against property’ covered by §3663A(c) and whether the MVRA applies to
bribery crimes.”) Second, Collins is factual distinguishable. Collins was a bank
employee who pled guilty to conspiracy to accept gratuities with the intent to be
influenced or rewarded in connection with a bank transaction. The issue was
whether the bank was entitled to restitution for those bank transactions, and there
was no suggestion of unclean hands. The plain language of the crime of conviction
in Collins expressly anticipated the bank transactions; indeed the only reason Collins
was paid off was to influence them. There is no similar situation here.

can’t do it in this proceeding because he was never charged in a fraud, with a fraud
against the NTC or anyone else.” Hrg. Tr. at 6, 12-13; see also id. at 18, 48-49.
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B.

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The NTC Suffered No Pecuniary Loss.
1. The Company’s Only Obligation Was to “Make Available Funding.”
The 2007 and 2011 Memoranda of Understanding on Joint Activities

(commonly known as “M-9s”) between the Company 2 and the UAW govern the time
period in the conspiracy set forth in Iacobelli’s indictment (2009 to mid-2015). The
operative language is that “the Company will make available funding” at a specified
rate of five cents per hour worked. NTC Ex. 2 at PgID 274; NTC Ex. 3 at PgID 283284; see also id. (“the Company will make available additional funding” in
connection with overtime hours worked).3 Notably, the M-9s do not designate the
NTC as the entity to whom the Company must make funding available. All the
Company had to do under the M-9 was “make funding available” upon request. This
was nothing more than a potential obligation until the draw request was made. FCA
accounted for this potential obligation by booking the monthly nickel fund allocation
as an expense and recording it as a liability on its balance sheet. When the NTC

2

The Company was Chrysler LLC in 2007 and Chrysler Group LLC in 2011. The
predecessor entity was Chrysler Corporation. The successor entity is FCA US
LLC.
3

At oral argument, the Court suggested that the Company “got a nickel back from
all the employees.” Hrg. Tr. at 56. To clarify, a nickel per hour worked was never
docked from employee paychecks to fund the NTC. Rather, the Company “made
available” its own income.
3

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made draw requests and money was paid out from FCA’s general cash account, the
liability decreased.
2. The NTC Disclaimed Ownership of the Funds that FCA Makes
Available to It in a Recent Department of Labor Investigation.
The NTC admitted what “make available funding” means in the M-9 during
the course of a Department of Labor investigation that was opened in 2014 to
determine whether the NTC was an “employee welfare benefit plan” within the
meaning of ERISA. 4 The NTC twice stated that it does not have any accumulated
financial assets or resources. See Govt. Ex. B at 1, 3 (“The Center is financed
exclusively by means of monthly cash transfers made directly by the Company. …
the Center does not accumulate financial assets over time.”); Govt. Ex. C at 2 (“[T]he
Center did not accumulate material amounts of financial resources and hold them
over from year to year. Rather, as indicated in the [M-9], the formula based funding
amounts were “made available” for Center programs.”); see also id. (“Accordingly,
the use of the term ‘Funds’ in the [M-9] does not connote - as the term sometimes
does in other contexts - any standing, fixed corpus of assets - much less a trust.”)
The NTC was particularly adamant that Tuition Assistance Program (TAP) funds
were not NTC assets or resources:

4

A determination that ERISA applied to the NTC would have triggered significant
reporting obligations on the NTC’s part.
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Like all other Activities, the TAP is not “funded,” within the meaning
accorded that term under ERISA. Money for this Activity is not segregated;
no participant has any right to any assets of the Center (or of the Company)
with respect to this Activity. Amounts required to provide reimbursement
under the TAP are simply forwarded, within approximately a month of the
need, to the Center, whose role is at most as an “administrator” of the Plan.
There is no authority for treating such an arrangement, where the employer
forwards its own unsegregated assets to an administrator for the short-term
purpose of administering benefits, as “funded” - and indeed, doing so would
be tantamount to regarding any third-party plan administrator as itself an
ERISA “plan.”
Id. (emphasis supplied). The NTC position was that such money was, at all times,
still FCA’s – even after it was transferred into the NTC bank account. Indeed, in
the same submissions, the NTC discussed the “pass-through effect of this
financing system.” Govt Ex. B at 3; see also id. at 6 (referring to self as a “‘passthrough’ entity”); see also id. at 5 (“the Center could, as a matter of logic, at most
be only ‘a method of implementing a plan, fund, or program’”). The NTC’s selfcharacterization as an “administrator,” “pass-through,” and “method” supports
the Court’s observation that the NTC may have been a “shill” for FCA. Hrg. Tr.
at 6, 44, 61.
3. The Company and the UAW Had the Exclusive Authority to Dispose
of Unused Funds.
The M-9s state that the Company and the UAW maintain the exclusive
authority to decide how to distribute any surplus funds:

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After reconciliation of claims, commitments, and accruals through the
expiration date of the new National Agreement, remaining National and
Reservoir Funds shall be disposed of in such a manner as the parties shall
agree consistent with the objectives of this Memorandum.
NTC Ex. 2 at PgID 275; NTC Ex. 3 at PgID 285 (emphasis supplied). Likewise, the
Company and the UAW had the express power to discontinue any part of the M-9 if
they so agreed, as well as make adjustments and modifications to it. See NTC Ex. 2
at PgID 275, 277; NTC Ex. 3 at PgID 286, 288; NTC Ex. 4 at PgID 295, 299.
The NTC reserve balance at the end of fiscal year 2014 was approximately
$34.1 million. See Govt. Ex. D. In August 2015, through their powers under the
M-9 discussed above, NTC Co-Chairmen UAW Vice President Norwood Jewell and
FCA Vice President Glenn Shagena agreed to significantly diminish this large and
unclaimed NTC surplus. See Govt. Ex. E. They essentially agreed to wipe out the
existing reserve balance and reset it at just 25% of the fiscal year 2015 surplus. Id.
at 2 (“As of December 31, 2015, the initial liability on the Company’s books will
equal 25% of the difference between fiscal year 2015 actual expenses and the amount
calculated using the formula.”) This agreement allowed for the return of the multimillion dollar prior reserve balance and 75% of the fiscal year 2015 surplus to FCA
income. It also set a 25% cap on the NTC’s annual access to surplus funds going
forward. See id. at 1 (“Annually, 25% of the difference between the amount

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calculated using the formula and actual expenditures shall be recorded as a liability
on the Company’s books.”)
II.

The Equities Favor Denial of the NTC’s Motion.
In United States v. Emor, 850 F. Supp. 2d 176, 204 (D.D.C. 2012), the court

addressed whether SunRise Academy, a private school for special needs students
incorporated as a nonprofit, could recover restitution from its founder after he pled
guilty to one count of wire fraud for misusing government funds provided to SunRise
for educational purposes. SunRise had students and classes actually took place. The
court determined that although SunRise met the MVRA’s statutory definition of
victim, it was undeserving of restitution because SunRise was both the alter ego of
Emor and his unindicted coconspirator. See id. at 204-211.
On the latter point, although SunRise was never charged, the court found
ample support that SunRise nevertheless “participated in” Emor’s crimes -- without
applying the NTC’s recommended benefit test or determining that SunRise made
any profit. See id. at 209 (citing Reifler & Lazarenko). One of the most important
factors was the knowledge and facilitation of the crimes by the members of
SunRise’s Board and a lack of independent corporate governance. The NTC board
shared similar governance failings, and five former JAB members stand convicted.

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In discussing the alter ego theory, the court also acknowledged that while a
corporation is ordinarily to be viewed as a distinct entity, this concept is “designed
to serve normal, inoffensive uses of the corporate device, and is not to be stretched
beyond its reason and policy.” Id. at 204 (citing Quinn v. Butz, 510 F.2d 743, 757
(D.C. Cir.1975)). It noted “the essence of the alter ego doctrine is not about the
ownership of shares, or formalities of any kind, but is instead about control,” more
specifically, whether the corporation “is in fact the alter ego or business conduit of
the person in control.” Id. at 207 (citing Labadie Coal Co. v. Black, 672 F.2d 92,
97 (D.C. Cir. 1982) (emphasis in original). “[W]hen the notion of legal entity is used
to defeat public convenience, justify wrong, protect fraud, or defend crime, the law
will regard the corporation as an association of persons.” Id. at 204 (citing Quinn).
The NTC’s insistence that it should be evaluated using traditional principles
of corporate liability operates from the faulty premise that the NTC is an independent
organization. But the NTC is a “joint enterprise between FCA and the UAW,”
created for the their mutual benefit and under their total control. See Mickens Plea
Tr. at 17. Every dollar for NTC operations comes from FCA. Decisions about how
to spend money at the NTC were made by officials at FCA. See id. at 17-18. The
M-9s further demonstrate that the NTC is absolutely limited in what it can do by the
circumstances of its creation. It has no power of self-determination. Its board was
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hand-selected by FCA and the UAW to represent and protect their respective
interests. Most significant, if the corporation dissolved, the NTC would still exist
under the M-9. But if FCA and the UAW exercised their authority under the M-9 to
discontinue the NTC, it would be shuttered. At oral argument, when NTC counsel
bemoaned that he had not seen the benefit, the Court had no trouble understanding:
the benefit was to FCA, and the NTC was its shill. See Hrg. Tr. at 43-44.
Even if NTC’s respondeat superior theory applies, Carter requires only
“some connection with the furtherance of the business” of the corporation – not a
benefit. United States v. Carter, 311 F.2d 934, 942 (6th Cir. 1963). Notwithstanding
the illegal conduct of most of its members, the JAB still had the broad authority to
conduct the NTC’s daily business. This included making charitable donations on
behalf of the NTC and contracting with vendors. Consistent with that broad
authority, JAB members approved donations of approximately $380,000 to General
Holiefield’s foundation and selected Monica Morgan as the exclusive provider of
over $600,000 worth of “trinkets and trash” from her various businesses. These
actions have “some connection with the furtherance of the business” of the NTC.
They also form the predicate for the NTC’s criminal liability. The NTC illegally
helped FCA do indirectly something that FCA could not do directly – provide money
and things of value to union officials. The benefit to the NTC was preservation of its
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very valuable 501(c)(5) tax-exempt status. Every tax year from 2009 to 2014,
Durden filed misleading Form 990 returns on the NTC’s behalf to cover up nearly
$1 million in related party transactions with LTLOF and Monica Morgan in order to
conceal the NTC’s ongoing role as a co-participant from the IRS and other potential
government investigators.
CONCLUSION
This matter is before the Court in a continuation of a sentencing for one
individual in an ongoing and complex prosecution in which many individuals and
entities remain under investigation. Provision of a restitution award to the entity at
the epicenter of the criminal activity in the middle of the case could lead to
incongruous results. The United States respectfully requests that the motion be
denied. Should the Court disagree and grant the motion, the NTC concedes: “That
doesn’t preclude the government from doing whatever they want in terms of the
NTC as a co-conspirator or charging it or whatever.” Hrg. Tr. at 20.
MATTHEW SCHNEIDER
United States Attorney
s/ Erin S. Shaw
ERIN S. SHAW
DAVID A. GARDEY
Assistant United States Attorneys
211 W. Fort Street, Suite 2001
Detroit, MI 48226
Phone: (313) 226-9100

Dated: March 1, 2019
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CERTIFICATE OF SERVICE
I hereby certify that on March 1, 2019, I caused the foregoing document to be
electronically filed with the Clerk of the Court using the ECF system, which will
send notification of such filing to the following:

Counsel of Record for Alphons Iacobelli
Counsel of Record for the UAW-Chrysler Skill Development and Training Program

s/ Erin S. Shaw
Assistant United States Attorney
211 W. Fort Street, Suite 2001
Detroit, MI 48226
Phone: (313) 226-9182
E-Mail: erin.shaw@usdoj.gov

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