New York Times
Union Chief to Return $200,000 From Stock Deal Under Inquiry
By STEVEN GREENHOUSE
The president of the carpenters'
union, Douglas J. McCarron, President Bush's closest friend in organized labor,
has agreed to return more than $200,000 in profits he made in a stock deal that
is under federal investigation.
On Tuesday, Mr. McCarron informed
the Union Labor Life Insurance Company, a labor-owned carrier known as Ullico,
that he would pay back the money, which he earned when he sold Ullico shares in
what is being investigated for the possibility of insider trading.
The Labor Department and a federal
grand jury in Washington are investigating whether the deal, in which Ullico
repurchased shares from Mr. McCarron and several other union presidents on its
board, enabled them to enrich themselves improperly at the expense of the
unions that own the insurer. Those unions include Mr. McCarron's, the United
Brotherhood of Carpenters.
Subsequent Ullico proxy statements
indicated that the board members profited by more than $6 million all told,
with Mr. McCarron earning $276,000. In his letter this week to Ullico's
chairman, Robert A. Georgine, he said he would return his profits, minus taxes
owed. His decision was first reported on Wednesday by the Bureau of National
Affairs, a publisher of legal and regulatory news.
“Issues surrounding our
implementation of the stock repurchase program have created such a diversion
and have been used by those who oppose labor's goals to damage the interests or
reputations of our unions and the trade union movement in general,” Mr.
McCarron's letter said. “This cannot be allowed to continue.”
The issue dates from December
1999, when Mr. Georgine invited board members to buy up to 4,000 Ullico shares
each at a price of $53.94. The stock price is periodically reset by the Ullico
board, and at the time it seemed inevitable that the shares would rise in value
because Ullico had heavy holdings in Global Crossing, a telecommunications
company whose stock had been soaring at a time when Ullico had not reset its
own price for some time.
In May 2000, Ullico's board set a
share price of $146, even though by then Global Crossing shares had fallen
nearly 50 percent from their 1999 peak. In November 2000, Ullico's board
approved a $30 million stock repurchase at $146 a share, enabling individual
board members, but not the shareholding unions, to sell almost all their
shares.
Mr. McCarron and several other
union presidents sold at $146, for a profit of $92 a share.
Six months later Ullico's board
set the new share price at $74, largely because of the plunge in Global
Crossing stock.
After news reports early this year
about the repurchases, Ullico's board named James R. Thompson, former governor
of Illinois, to investigate. He is due to report back within the next few
weeks.
Copyright 2003 The
New York Times Company