Allied Shareholders Charge Racketeering

May 2, 2007: A major shareholder in Allied Automotive Group has filed a class-action suit charging that Yucaipa and the Hoffa administration entered into a secret conspiracy in May of 2006. The shareholders allege that the IBT concealed the Teamster concessions until after the November 2006 IBT election. The suit was filed on April 23 under the Racketeer Influenced and Corrupt Organizations (RICO) Act.

It is highly doubtful that the suit, which seeks at least $150 million in damages from Yucaipa and the IBT for 2,200 Allied shareholders, will have any impact on the expected approval in bankruptcy court of the Yucaipa takeover, with 17 percent wage concessions, of Allied. It is hard to see that Teamsters have anything to gain from the action, but it provides an inside look at deals made behind the backs of Teamster carhaulers.

The suit alleges that “Yucaipa colluded, combined and conspired with the IBT…” in about May 2006, when “Hoffa personally brought the potential Allied deal to Ronald Burkle, the founder and head of Yucaipa, at the urging of former President William Clinton, a personal friend of Burkle…and a profit participant in at least some of its affiliated funds.”

The suit further alleges that Hoffa and Burkle delayed arranging a deal because of the 2006 IBT election. “The period from May to November 2006 would have been a particularly inconvenient and problematic time for Hoffa to have to announce and explain to the rank-and-file membership of the IBT any concessions or givebacks…As a result, the IBT improperly sought to and did use Yucaipa to defer and effectively hide from the IBT membership the likelihood of and the need for ultimate concessions to Allied.”

Yucaipa was the big winner, the suit argues, because Hoffa made the Allied concessions available only to one bidder for Allied, Yucaipa.

Click here for the Wall Street Journal article on this development.

Click here for a copy of the complaint filed in federal court. (Large File)

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